What is the Matter with Aggregate Demand and Supply?
The aggregate demand and supply model has now replaced the ISLM model as the main textbook macroeconomic model. Yet somehow the aggregate demand and supply-model does not seem to do what a good model is supposed to do. Furthermore some of its present textbook versions unfortunately leave the misleading impression that the basic methodological differences between the Keynesian and the neo classical macroeconomic models can be reduced simply to a difference between the elasticities of the aggregate supply functions in these models.1
KeywordsDemand Function Aggregate Demand Supply Function Phillips Curve Supply Model
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