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This article explores how insufficient income from production expenditures leads to increased debt in a monetary economy.

May 31, 2026Open Access

Inadequacy of revenues and endogenous economic cycles in a monetary economy of production

Key Points

This article explores how insufficient income from production expenditures leads to increased debt in a monetary economy.
Developed a theoretical framework based on post-Keynesian circuit theory.
Modeled endogenous cycles of economic activity accounting for debt dynamics.
Analyzed the impact of debt on economic consumption and production.
Identified a direct correlation between production expenditure insufficiency and debt accumulation.
Demonstrated that excessive debt leads to economic instability during growth phases.
Outlined a reversal of this trend during depression periods, affecting economic cycles.

Abstract

The recurring cycles of economic activity in a capitalist economy have prompted a variety of explanations. Some of these focus on the excessive indebtedness of economic agents during a growth phase, which may result from overly optimistic behavior or excessive risk-taking. From a post-Keynesian circuit theory perspective, this article shows that this excess debt could also result from firms’ current production expenditures generating insufficient income to enable them to purchase production. In this case, society must go into debt to consume what it produces, creating ever-increasing debt. This situation tends to be reversed during a depression. Based on these assumptions, endogenous cycles of economic activity can be modeled within the framework of a monetary economy of production.

Inadequacy of revenues and endogenous economic cycles in a monetary economy of production

Key Points

Abstract

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