Integration of Market Exchange and money circulation Mot ccount of Goverme Implications to post Keynesian macroeconomics In this paper, I present a contribution to the issue of money circulation. The money circulation presented here is based on a market exchange process, called the multiplier process Such a process shares much similarity as in those of search process, but it goes a step further by introducing a special trader, call the autonomous demander. With this introduction, the exchanges need not be executed randomly and disorderly as in most search process models Money in such a process is naturally integrated with the proceed ing of market exchanges, and Clower's"cash in advance" constraint is always satisfied. Outwardly, the money circulation is now closed, continuous and dynamics The post Keynesian approach to economic theory builds on Keynes's General Theory in which the aggregate demand is decomposed into two parts: D, and D2.7 According to Keynes, D, the consumption, is induced by income, and therefore the aggregate demand is fundamentally determined by D,, the investment. As D, is determined(through an investment function), the aggre gate demand is also determined at a multiple of D2. Algebraically, if Y=C+1, and C=cY, then Y=/(1-c) As Davidson(1992) points out, "Since classical theory does not recognise the possibility of a D2 category Keynes's taxonomy prov ides an inherently more general theory. "(p. 458)Integration of Market Exchange and Money Circulation 10 Implications to Post Keynesian Macroeconomics In this paper, I present a contribution to the issue of money circulation. The money circulation presented here is based on a market exchange process, called the multiplier process. Such a process shares much similarity as in those of search process, but it goes a step further by introducing a special trader, call the autonomous demander. With this introduction, the exchanges need not be executed randomly and disorderly as in most search process models. Money in such a process is naturally integrated with the proceeding of market exchanges, and Clower's "cash in advance" constraint is always satisfied. Outwardly, the money circulation is now closed, continuous and dynamics. The post Keynesian approach to economic theory builds on Keynes's General Theory in which the aggregate demand is decomposed into two parts: D1 and D2 . 7 According to Keynes, D1 , the consumption, is induced by income, and therefore the aggregate demand is fundamentally determined by D2 , the investment. As D2 is determined (through an investment function), the aggregate demand is also determined at a multiple of D2 . Algebraically, if Y = C + I , and C = cY , then, (1) Y = I (1− c) 7 . As Davidson (1992) points out, "Since classical theory does not recognize the possibility of a D2 category, Keynes's taxonomy provides an inherently more general theory." (p. 458)