Monetary economy

Keynes emphasized that money, as a convenient means of exchanging, is not something neutral and transitory in its effects. According to him (1933, pp.408-9), “an economy, which uses money but uses it merely as a neutral link between transactions in real things and real assets and does not allow it to enter into motives or decisions, might be called [...] a real exchange economy. [...] In contradistinction to this, with an economy in which money plays a part of its own and affects motives and decisions and is, in short, one of the operative factors in the situation, so that the course of events cannot be predicted, either in the long period or in the short, without a knowledge of the behaviour of money between the first state and the last state. And it is this which we ought to mean when we speak of a monetary economy.”

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