This chapter discusses the results in Chapters 2 to 5. Section 6.1 surveys Chapters 2 to 4. The results in Chapter 5 are reviewed in section 6.2.

Chapters 2–4

Bond-financed increase in government spending

In Chapter 2 (regime I), the firm was rationed in the credit market, and the household was rationed in the labor market. In this environment, a bond-financed increase in government spending further crowds out the firm from the credit market, which leads to a reduction in planned production and thus a decrease in both inventory accumulation and the demand for labor. The reduction in the demand for goods used as input increases the current supply of goods, which improves the balance of trade. As labor demand decreases, the household's labor income is reduced. In response to this, the household reduces its demand for goods and assets (money and bonds). The decrease in the demand for bonds further reduces the firm's bond ration, causing another round of cutbacks in planned production. Thus, in this regime, the interdependence of the markets through quantity rations introduces a multiplier process that reduces planned production in each round. However, it was shown that the expansionary effect of the increase in government spending exceeds the contractionary effect of the reduced bond ration; so the net effect is a deterioration in the balance of trade.

In Chapter 3 (regime II), the household was rationed in the bond and labor markets, but the firm was not rationed in any market.