Widdekind
Member
- Mar 26, 2012
- 813
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new loans of credit are constantly extended, to numerous individuals, throughout the economy ? in the "short-term", new credit resembles new money; new "money" thusly "materializes" into the economy, at numerous locations. e.g. many individuals each day borrow credit, for new cars; all of their purchases inject "money" into all those car dealerships, their employees, their grocery-stores, movie-theaters, restaurants, etc.The helicopter drop was Milton Friedman's thought experiment. The point of it being that demand is raised everywhere at once... monetary transmission is more toward the "helicopter drop" side of the spectrum, where it raises demand in many places all over the economy at once.
"microscopically", new "money" enters the economy at one location, because new credit is loans for single purchases, at single establishments; "macroscopically", the "NM" hypothesis applies in a "distributed" manner, with many "injections" co-occurring simultaneously ?...how money affects demand in the economy, whether entering at a point and diffusing raising demand in locally at first ("new money" hypothesis); or causing demand to rise relatively evenly over the whole economy at once... the credit channel [is not] the only way money affects demand.