Aggregate demand in a growing capitalist economy is defined as the sum of nominal GDP income and the rate of change in private sector debt ($AD = Y + \Delta D$), wherein credit expansion serves as the primary endogenous mechanism financing investment rather than saved purchasing power. The theory posits that excessive accumulation of leverage drives speculative asset price bubbles until a peak is reached, triggering "debt-deflation" where negative changes in aggregate demand cause cyclical recessions characterized by falling prices and rising unemployment. This framework integrates Fisher's debt deflation dynamics with Minsky’s financial instability hypothesis to explain how disequilibrium shifts from sustainable growth phases (Ponzi finance) into systemic crises driven strictly by macro-leverage constraints rather than external shocks or monetary policy errors.
Aggregate demand in a growing capitalist economy is defined as the sum of nominal GDP income and the rate of change in private sector debt ($AD = Y + \Delta D$), wherein credit expansion serves as th…