Modern monetary theory

Macroeconomic theory / From Wikipedia, the free encyclopedia

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Modern monetary theory or modern money theory (MMT) is a heterodox[1] macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires.[2][3] According to MMT, governments do not need to worry about accumulating debt since they can create new money by using fiscal policy in order to pay interest. MMT argues that the primary risk once the economy reaches full employment is inflation, which acts as the only constraint on spending. MMT also argues that inflation can be addressed by increasing taxes on everyone to reduce the spending capacity of the private sector.[4][5]

MMT is controversial, and is actively debated with dialogues about its theoretical integrity,[5] the implications of the policy recommendations of its proponents, and the extent to which it is actually divergent from orthodox macroeconomics.[6] MMT is opposed to the mainstream understanding of macroeconomic theory and has been criticized heavily by many mainstream economists.[7][8][9][10]

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