ABSTRACT
This chapter discusses the impact of money on the real economy. According to neoclassical economics, real economies are populated by agents who make forecasts that are in perfect agreement with the actual development of economic variables. The circuit of money is based on a continuously growing amount of borrowing. The simple circuit of money of classical Circuitism has become a complex web of flows of money originated principally by household borrowing. Classical Circuitism considers money as something borrowed from banks by capitalists or firms which is then used to coordinate production and pay wages, and finally returned to banks after products are sold. To explain the “puzzle” of the declining velocity of the circulation of money, Friedrich Werner proposed an explanation: the Quantity Theory of Credit. Economic growth is a topic of great importance in modern economics; it impacts the quality of life of a nation’s citizens.
