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Monetary Policy: Non-Volitional and Volitional Saving

In: Shaking the Invisible Hand

Author

Listed:
  • Basil John Moore

Abstract

When nonbank agents borrow money from (i.e. sell their own IOUs to) other nonbank units, in exchange for previously accumulated money balances, the money supply does not change. The increase in current spending by borrowing units is roughly offset by the decrease in spending on current output by lending units. When the money supply is constant, there is no accompanying long-run growth in AD, unless the income velocity of money has a positive secular drift. When banks undertake no new net lending, the supply of credit money remains constant. Changes in AD and income reflect primarily changes in the income velocity of money.

Suggested Citation

  • Basil John Moore, 2006. "Monetary Policy: Non-Volitional and Volitional Saving," Palgrave Macmillan Books, in: Shaking the Invisible Hand, chapter 15, pages 331-358, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-51213-9_15
    DOI: 10.1057/9780230512139_15
    as

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