Aggregate demand is based on all consumption, whether governmental or personal. It doesn't matter if you spend it or the government does. As long as there is no new borrowing, there is no "pump priming", and no inflation.
Both demand, and the money supply, are supposed to increase with an expanding economy. The point about the increase in income is that it is natural result of greater GDP, not an artificial stimulus. Inflation may be caused when demand gets too far ahead of supply, but not when they are in relative balance.
On the other hand, if the settling of the debt is not gradual, there is a sudden decrease in the money supply, which causes deflation and recession. Another way to look at it is this: massive debt settlement would produce a sudden downturn in aggregate demand, and thus cause a recession, as production was not absorbed.
The rest is too silly to respond to...... |
