MANAGING FULL EMPLOYMENT
MODERN MONETARY THEORY SHOWS HOW FULL EMPLOYMENT CAN BE ACHIEVED!
POTENTIAL GDP is a level of overall spending - by the government and the non-government sector - at which there is full employment. If the economy is not operating at its potential, then the private sector has failed to invested or spend enough to generate the necessary growth nor has income from net exports contributed enough. This only leaves the government to close the spending gap. Conceptually, a government disposing of its own freely floating currency could act using two powerful tools - spending in excess of tax revenue, and taxation - to ensure that the gap between the actual economic activity and potential GDP is quickly closed. Achieving the full employment that prevailed for 30 years between 1945 and 1975 in western economies is definitely possible!