I explained in my first post on Earl Thompson’s reformulation of macroeconomics that Thompson posited a model consisting of a single output serving as both a consumption good and as a second factor of production cooperating with labor to produce the output. The single output is traded in two markets: a market for sale to be consumed and a market for hire as a factor of production. The ratio of the rental price to the purchase price determines a real interest rate, and adding the expected rate of change in the purchase price from period to period to the real interest rate determines the nominal interest rate. The money wage is determined in a labor market, and the absolute price level is determined in the money market. A market for bonds exists, but the nominal interest rate determined by the ratio of the rental price of the output to its…
View original post 912 more words
Utopia, you are standing in it! 
Recent Comments