The Effective Demand Principle
The effective demand principle states that “in a market economy – and, therefore a monetary economy, where money attends all functions (medium of exchange, unit of account and store of value), in every transaction of buying and selling there is only one autonomous decision: the spending one. As a result, all spending results in income of the same extent. By aggregation, the totality of spending in any given period is always equal to and determines the totality of income”.
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Famous quotes containing the words effective, demand and/or principle:
“I am sorry to think that you do not get a man’s most effective criticism until you provoke him. Severe truth is expressed with some bitterness.”
—Henry David Thoreau (1817–1862)
“Most of the ladies and gentlemen who mourn the passing of the nation’s leaders wouldn’t know a leader if they saw one. If they had the bad luck to come across a leader, they would find out that he might demand something from them, and this impertinence would put an abrupt and indignant end to their wish for his return.”
—Lewis H. Lapham (b. 1935)
“The principle of asceticism never was, nor ever can be, consistently pursued by any living creature. Let but one tenth part of the inhabitants of the earth pursue it consistently, and in a day’s time they will have turned it into a Hell.”
—Jeremy Bentham (1748–1832)