Reply To: Some questions


Here are the categories of Goods:

1. Present Goods
a. Consumer Goods
b. Media of Exchange
2. Future Goods
a. Producer Goods

Income = Consumption + Saving-Investing

Here are the categories of Saving-Investing:

1. Plain Saving-Investing: Storing existing goods.
2. Capitalist Saving-Investing: Diverting resources from more direct to more indirect production.

Time preference determines the ratio of consumption to capitalist saving-investing and the interest rate of return on production. Capitalist saving-investing earns a rate of interest.

People hold money balances to deal with the uncertainty of the future. Money holdings are plain saving-investing. Plain saving-investing does not earn a rate of interest.

In the ERE there would be no money holdings at all, yet there would be capitalist saving-investing and a capital structure of production for producing consumer goods. Also, all production would earn the interest rate of return, but there would be no profits or losses.