the whole argument would be the same even if it wasn’t about repaying debts. Assuming the bar & lodging man went and bought meat, the butcher man went and bought feeds, the agrovet man went and paid for transport, the transport man went to drink at the bar. The bar & lodging man would still use the money from the transport man to refund the tourist. Every person would still get value for their money
This is economics, under the quantity of money theory : the “velocity of money” is the number of times one unit of currency is spent over a given period of time.
The equation for GDP is: GDP = Money Supply x Velocity of Money.
To solve for velocity in your example, we rearrange the equation to get Velocity = GDP / Money Supply, or (15,000 / 3000). Velocity of money in that economy is 5.
Velocity of money hutumiwa sana by terrorist-government-beauracrats to set things like interest rates and outright theft in form of taxes and sneakily via inflation.
It is partly commerce and partly economics. The commerce part is basically the exchange of services/goods for legal tender. The economics part is the flow of the legal tender from a point of surplus to a point of deficit. Accounting will take place after the facts and on paper.
quite an interesting question. it is called monetary economics as mentioned. although it is quite hard for those activities to happen simultaneously, it does happen in the real world. it is almost the same concept that the banks use to issue loans
Even before the italian arrives, the “net” debt in the town is zero. If these 5 businesses were to have a baraza and do “reconciliation” on the debts, they would emerge debt free. The italian’s 3k was not needed to begin with.
this is what happens daily in our normal lives. the central bank can’t print money for every person akuwe na yake. the limited supply is what circulates in the market. the faster the circulation the better. economics is important for every individual.