The full employment interest rate implicit in classical economic theory is 4½%, deduced by including the rate of normal profit in a simple macroeconomic model. By not fixing the interest rate at this optimum, Central Banks ...
By including the rate of normal profit in a simple model of the macro-economy, the full employment interest rate is deduced to be 4½% at which Labor is not exploited by Capital. Criticisms by Marx and Keynes of the free-market ...