A Simple Three-sector Economy

• Non-government sector includes foreign nations

  • For greater realism, let's separate them out

  • Assume foreign trade is conducted in U.S. dollars

• All financial flows will still net out

  • Wynne Godley: "Everything must come from somewhere, and then go somewhere." (Kelton, 132)

            Domestic Private Sector Balance

        +         Government Sector Balance

        +            Foreign Sector Balance
        ___________________________________

        ≡                                 0