Authors: Dirk Ehnts
Addresses: Faculty of Economics, Technical University of Chemnitz, D-09107 Chemnitz, Germany
Abstract: In the aftermath of the great financial crisis (GFC) a consensus has formed that economics needs to be reinvented, and most especially macroeconomics. In this article, a first lecture of macroeconomics provides students with a sound foundation. Using a graphical model we demonstrate that when net expenditures increase, the world economy expands with rising employment; and when net expenditures slow, so does the world economy. At the margin, expenditures can only be increased by injections of net deposits created by an increase in debt. Concluding this first lecture, students take away the insight that (rising) expenditures and debt are necessary for the world economy to grow, and that both the rate of unemployment and the rate of inflation are correlated to the change in debt.
Keywords: monetary circuit; fiscal policy; monetary policy; sectoral balances; macroeconomics; saving; financial flows; balance sheets.
International Journal of Pluralism and Economics Education, 2020 Vol.11 No.2, pp.149 - 159
Accepted: 27 Jul 2020
Published online: 17 Nov 2020 *