DSGE
VIP Member
- Dec 24, 2011
- 1,062
- 30
- 71
that's obviously not true because Income necessarily equals expenditure. That's an identity. It always holds.
what about "cash on hand" ?
Outflows can derive, from Inflows; or from draw-down of current Stock:
A stock isn't income. If you draw down a a stock and spend it, the spending as a flow. Your spending (expenditure) is somebody else's income.
dS/dt = +I -O
Seriously dude, your maths doesn't help things. It just makes shit more confusing. Just use your words unless absolutely necessary.
E.g. imagine nobody buys anything (Expenditures = zero); everybody could still have Income, if new Money entered the economy ("victorious general showers the masses with Money from campaign"):
Is that income people receive is also an expenditure from the general (or central bank or whoever).
It's an identity. You have to understand that that means it always holds. Always, invariably, never violated. The same way as sin^2(x) + cos^2(x) = 1. It's always 1, no matter what. If I arrive at some conclusion that sin^2(x) + cos^2(x) = 1 + 0.5*x; then I've fucked up. Income and expenditure are always equal. If you arrive at a conclusion otherwise, you've fucked up somewhere.