[itsoktocry]

>That is not entirely true.

No, it's entirely true. The economy is a closed system. Employees can't "put that income back into the economy", because it has never left.

How it gets redistributed will vary, and you can make normative arguments about spending the money at the local coffee shop. But the net effect on the economy is the same.

[milesvp]

>The economy is a closed system

This is sort of not true. The biggest example of why is the concept of the velocity of money. If you’re unfamiliar with this concept, it’s the idea of of how many times a single dollar is used in a given time period. It’s a very important measure, and it’s historic low at the start of the lock downs was why the fed dumping so much money into the economy was not a mistake (at the time). It’s an effective multiplier, and has very real impact as to the total utils that everyone in the spending chain collect.

What this means, is that when money is spent outside a country, there is a very real risk that that the local velocity of money goes down, even though the gdp of the global economy is going up.

[dragonwriter]

> The economy is a closed system.

No, its not; value (and, separately, money) can both be created and destroyed. And, when examining any scale smaller than the global economy, value and money can each enter or exit the universe of analysis from or to the outside, as well.

[jewayne]

If that were true, then recessions and depressions would be impossible. The velocity of money moving through the economy would be a constant, like the speed of light. But recessions and depressions happen, so we know that the disappearance of certain transactions from the economy can have a negative macroeconomic effect.

[dleink]

Even if it's a closed system (I'm not sure it is), it's definitely not a zero-sum system.