Download This PaperA Simple Model of First-Round Effects
29 Pages Posted: 11 Sep 2017
Date Written: August 22, 2017
Abstract
Rather than through a neutral helicopter drop, new money enters the economy through expenditures of specific individuals, which changes relative prices. These relative-price changes, sometimes referred to as “first-round effects,” are well documented. However, economists do not have a simple model that can capture them. To remedy this omission, I present a diagrammatic model with two different representative agents.
Keywords: non-neutrality of money, Cantillon, Cantillon effects, first-round effects, Hume, injection effects
JEL Classification: B11, E31
Suggested Citation: Suggested Citation
Bilo, Simon, A Simple Model of First-Round Effects (August 22, 2017). Available at SSRN: https://ssrn.com/abstract=3034499 or http://dx.doi.org/10.2139/ssrn.3034499
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