Productivity as a Relation of Economy Output and
Input.
Role of Productivity in Price Dynamics.
This paper investigates the relationship between output goods in an economy and
the input factors utilized to produce them. By defining stable prices relative to a chosen
base good (or basket of goods), it illustrates how inflation or deflation can be controlled.
The concept of productivity plays a key role in determining changes in relative prices:
when the productivity of an individual good or service grows faster or slower than the
average productivity, its price decreases or increases relative to others. Likewise, in the
input (factor) economy, the real price of a factor changes in line with its productivity.
Through these analyses, the paper shows that both GDP (output) and GDI (input) can
be linked via an appropriate choice of base prices, helping to maintain a stable price
environment and providing a consistent way to measure real growth over time.
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Monetary Policy in a Stable-Price Economy.
This document outlines a framework for monetary policy in an economy that aims to maintain stable prices.
Four primary economic scenarios are identified, each requiring a distinct approach to loan creation and money supply management.
In a steady-state, “evenly rotating” economy, no additional money is required,
and regular purchases or investments should be funded by loans from existing savings rather than newly created currency to avoid inflation.
When production expands—either through population growth or productivity gains—new money must be injected in proportion to the increased output to preserve price stability and fair income distribution. Finally, structural changes in business processes may justify targeted “thin air” loans to facilitate new intermediate transactions (B2B) without eroding existing purchasing power, provided these loans are properly collateralized and tracked with a Business Output indicator. By aligning the money supply with real economic changes, this approach aims to eliminate disruptive cycles—such as recessions and inflationary booms—and ensure a stable, scientifically guided monetary policy.
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