Aggregate demand and supply
AbstractThis paper is part of a broader project that provides a microfoundation to the General Theory of J.M. Keynes. I call this project 'old Keynesian economics' to distinguish it from new-Keynesian economics, a theory that is based on the idea that to make sense of Keynes we must assume that prices are sticky. I describe a multi-good model in which I interpret the definitions of aggregate demand and supply found in the General Theory through the lens of a search theory of the labor market. I argue that Keynes' aggregate supply curve can be interpreted as the aggregate of a set of first order conditions for the optimal choice of labor and, using this interpretation, I reintroduce a diagram that was central to the textbook teaching of Keynesian economics in the immediate post-war period.
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Bibliographic InfoArticle provided by The International Society for Economic Theory in its journal International Journal of Economic Theory.
Volume (Year): 4 (2008)
Issue (Month): 1 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1742-7355
Other versions of this item:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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