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The Theory of the Monetary Circuit

In: Money and Production

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  • A. Graziani

Abstract

The theory of the circuit faces the fundamental question of any macroeconomic theory, namely how the level of activity of an economic system is determined and what determines the distribution of the social dividend among the main social groups. The basic idea is that, in a wage economy, possession of wealth as such does not imply being admitted to a share of real income. Since access to money and credit is a key factor in a wage economy, producers of money and credit enjoy a privileged position and are admitted as such to a share of total product. It is therefore a typical aspect of the theory of the monetary circuit that in any macroeconomic model, banks and firms can never be merged into one single sector.

Suggested Citation

  • A. Graziani, 2024. "The Theory of the Monetary Circuit," Chapters, in: Louis-Philippe Rochon & Mario Seccareccia (ed.), Money and Production, chapter 6, pages 111-140, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:22417_6
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    File URL: https://www.elgaronline.com/doi/10.4337/9781035314034.00012
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    Keywords

    Economics and Finance;

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