ABSTRACT
Modern Monetary Theory (MMT) is the newest member of the portfolio of macroeconomic theories. People need to accumulate fiat money in order to pay their taxes, and the government itself supplies that money. The change in the financial wealth of the government consists of income minus expenditures. Financial transactions that take place within one of the sectors are called inside transactions, and transactions between sectors are known as outside transactions. In 1909, a German economist named Georg Knapp coined the term “chartalism,” which is the idea that money originated with a government’s effort to influence the amount of economic activity. The private sector earns income from providing real capital and labor resources, and then spends some of the income, saves some, and pays taxes. MMT has important policy implications. Paul Krugman (2020b), a modern Keynesian economist and a winner of the Nobel Prize, thinks that Lerner was on the right track but was not entirely correct.
