In this chapter, changes in the rate of inflation are finally incorporated into the ISLM–ADAS analysis. This raises the overall level of sophistication of our analysis from Chapter 7 by incorporating a “real world” aggregate supply curve into the ISLM analysis. The stage is also set for an explanation of paradigm shifts between Keynesian and supply-sider models.
KeywordsLabor Market Interest Rate Monetary Policy Central Bank Real Wage
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