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I disagree with the money claim for two reasons, first of all because according to monetary theory inflation is linked directly to an increase in the money supply, therefore with no increase in the money supply there will be no inflation. Secondly whilst you might not increase the actual amount of cash in the system there would still be other increases in wealth because that money has to move around the system - e.g. for buying goods and services. Once the money has been transferred it will be invested in producing more goods - therefore increasing the value of the economy whilst not actually increasing cash.
I don't need to add, that if cash is not being used then it has no intrinsic value - hence the view that has been espoused about the real value of money is far too simplistic. —Preceding unsigned comment added by 126.96.36.199 (talk) 10:18, 29 September 2009 (UTC)
I broadly agree with the above comments. I feel that the claimed "tautology" is anything but, in large part because it ignores the nature of money as a unit of exchange rather than a real good. The total output of an economy is not dictated by the money supply (though a mismanaged money supply can hurt an economy). The total output is the result of economic activity - individuals and firms choosing to produce goods and provide services in exchange for the products and services of others.
To clarify, "adding money" to the economy can mean one of three things: (i) printing more notes, (ii) increasing the "effective" amount of money by increasing money velocity (i.e., the rate at which each note changes hands) (n.b., certain schools of economic thought feel this never needs to be considered), and (iii) increasing the "real" productivity of an economy, by producing more goods. (Note that the final type of "adding" usually necessitates the first or second also occur. Real growth in the face of deflation is very rare over history.)
Because of the author's statement that money can be "added" by businesses, individuals, and government, it seems necessary she did not intend the first type of adding (because governments insist on a monopoly on printing notes). Also, the second type - velocity changes - seems to be different from what is intended, because the author seems to imply a fall in the real value of the economy. So the author seems to imply that real productivity falls, because a fixed quantity of nominal wealth (the initial $100 trillion of the example) undergoes inflation.
A necessary rebuttal to the illustrative example is to point out that nominal wealth is not fixed. Most economies that experience dramatic growth in total real output also experience inflation - sometimes very high inflation. (E.g., China has experienced double digit inflation for more than 20 years, even as its economy exploded.)
I feel that this "nominal" dollar way of measuring the economy is entirely wrong-headed, and ambiguities over real and nominal measures are driving most of the author's confusion. To clarify, consider that the U.S.'s GDP was over $14 trillion dollars in 2008 (measured in 2008 dollars). At the same time the total US money supply, measured in actual existing paper notes, fluctuated between $1 and $2 trillion. (There are several different measures of money supply, of which this is the absolute strictest. Of course, none match closely to the total GDP, as they both measure fundamentally different things.) It is interesting to note that, for many years prior to 2008, the total existing number of paper notes in existence was fixed by law at $1 trillion (which made up the Federal Reserve's balance sheet), which were moved in and out of the economy by FRB policy makers to regulate inflation. At the same time, the total economy was growing. 188.8.131.52 (talk) 18:46, 18 November 2009 (UTC)
Maybe I'm missing something obvious, but the Multiplier section makes no sense to me at all... anyone care to clarify it? -- Masterzora 16:47, 8 May 2006 (UTC)
- Seconding. We should probably tag this for expert attention or something. DE 05:58, 13 September 2006 (UTC)
- Thirding. What some of the variables represent is not included and only the ability of lenders to derive and income is brought to an end. In practice deficits and surpluses still occur to less extremes and more managed through bonds and other more public resources than banks and private lenders. -- Taxa (talk) 01:04, 12 June 2008 (UTC)
I've removed the following external link from this article. Please see WP:EL. If this web page was used as a reference for information in this article, please see WP:CITE#HOW. --SueHay 02:15, 7 June 2007 (UTC)
Math formula formatting
Could someone please check the math equation formatting on this page? --SueHay 03:34, 11 June 2007 (UTC)
- Not only that but a list of what all the variables represent and why they are included. Regardless the conclusion reached is erroneous. What a balanced budget does is reduce the tax burden on taxpayers by eliminating the need to pay interest on borrowed money. -- Taxa (talk) 01:09, 12 June 2008 (UTC)
The explanations given (right now) in this article are plainly embarrasing. Please, someone (with knowledge in economics) edit this article so it complies with wikipedia standards. —Preceding unsigned comment added by 184.108.40.206 (talk) 04:28, 18 October 2009 (UTC)
I concur - this article is exceptionally bad. The author shows no understanding of nominal versus real economic output, the tenuous link between money supply and total output, and they completely misstate the nature of the money multiplier. In fact, the classic Keynesian multiplier suggests exactly the opposite effect of government deficit spending. While this result is widely disputed, the fact it is not mentioned at all suggests the author has no knowledge of this fact. 220.127.116.11 (talk) 18:49, 18 November 2009 (UTC)
Look out for possible copyright violations in this article
This article has been found to be edited by students of the Wikipedia:India Education Program project as part of their (still ongoing) course-work. Unfortunately, many of the edits in this program so far have been identified as plain copy-jobs from books and online resources and therefore had to be reverted. See the India Education Program talk page for details. In order to maintain the WP standards and policies, let's all have a careful eye on this and other related articles to ensure that no material violating copyrights remains in here. --Matthiaspaul (talk) 12:40, 1 November 2011 (UTC)