From Cambridge to Eternity: “Saving is Also Spending”
Chapter 1 The Economy in “Nominal Money” Suppose John Greedy McScrooge puts one billion dollars under the mattress on the beginning of Mach for the purpose of “saving” (for the future). Originally, the money was earmarked to be spent in the month for widgets. His individual market demand curve for the widget suddenly disappears. There is an interspatial gap of spending between the two scenarios, original vs actual. A classical economist would account for such a variation in March: ① the aggregate demand curve shifts to the left; ② the market price declines; ③ the real quantity traded, or sold and bought, declines; ④ accordingly, the suppliers in town who happen to be “rational” collectively reduce the “real quantities” of production; ⑤ notwithstanding, the market is cleared in equilibrium; ⑥ everybody including McScrooge i...