Financial Counterparts of Saving and Investment and Inconsistency in a Simple Macro Model
Financial assets play two roles in the economy. They provide wealth-holders with assets which relieve the saver of having to own and operate real capital, and they serve to transfer purchasing power from surplus- to deficit-spending decision units. Macroeconomic theory until recently has concentrated almost exclusively on the portfolio role of financial assets (including money), leaving implicit their role in financing expenditure.1
KeywordsFinancial Asset Decision Unit Bond Market Supply Function Cash Holding
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