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- #81
By the way, unemployment is a direct consequence of net government spending being insufficient. In terms of accounting, for example, in order for aggregate output to get sold, total spending must be the same as total income (even if income that is generated through production is spent or sits on the sidelines). Unemployment is labor being idle and not being able to source a buyer at the prevailing wage. If there isnt sufficient government spending, unemployment will increase in the private sector (in the aggregate) as the private sector spends less money than it earns so to speak. Any decreases in nominal or real wages simply will not act as a clearing mechanism in the labor market, barring they somehow remove the private sectors desire to net save and spend more $$$$. Unemployment is a manifestation of net government spending being too small to meet the requirements to net save and pay taxes.
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