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asked ago in Current Economic Issues by (2.7k points)
edited ago by
The endogenous growth(I presented it in one of my previous works),due toanincrease in profit, which createsspending into the economy(Translated in new wages in the profitable firmor profits and new wages in otherfirms)in a ratio below 1because of the division of dividends and investment, is false. That’s because the increase in profitis a decrease in profits of another firmand the increase in consumptiondue to higher wages in the first one, is a decrease in thesecond one. Therefore,wages diminish equally(i.e. cross consumption between workers of both firms). The financial multiplier (famous in the literature) can create growth in the economy because it’s a type of exogenous growth(only if credit or debt keepsflowing and expanding its size). But this growth has to be repaid or when private debt is too highthere is a credit crunch that destroys the economic activitycreated by the FinancialMultiplierat the worst. In these types of growth, the first is unreal and the second unsustainablebecause the inflow of credit must beinfinite (profits absorb part of thatinflownecessaryto reach a point where consumption and supply matches every short business cycle,i.e. a year.Theprofits takenby owners leave the economy in a newbad equilibrium). Butwhat happens when this inflow is continuous because of a trade balancethat’shighly positive?What’s the exporters trap?                                                                                                      https://1drv.ms/b/s!Ap5alRvO4PEGhWc8IcLEFlUi7pBd                                     RYAN McCONNELL
commented ago by (2.7k points)
edited ago by
I did a little change in my graphic model.

I think that this work helps to explain Gresham's Law when bad money drives out good money during a period of high inflation.                                    I didn't realize that inflation can offset a little bit shortage. The evolution of that inflation has to be studied.

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