Journal of Economic Literature (JEL) Code(s)
C7, D50, E4
An adequate description of economic dynamics requires the introduction of a monetary system including default penalties and expectations in a society whose economy utilizes money and credit. This essay notes and discusses several of the factors involved in the use of money and credit in a process oriented economy. It links these observations with the general equilibrium treatment of the same underlying economy and formulates a government guidance game where the government sets several key parameters in a monetary economy suﬀicient to select a unique equilibrium. Low information and error correction are noted. The links to the ﬁrst and second welfare theorems of GE are also considered as is the setting of the price level.
Qin, Cheng-Zhong; Quint, Thomas; and Shubik, Martin, "Default, Efficiency and Uniqueness" (2017). Cowles Foundation Discussion Papers. 188.