Criticisms of Aggregate Demand and Aggregate Supply and Mankiwâ€™s Presentation
AbstractThis paper argues that the standard AD-AS framework as presented in intermediate macroeconomic textbooks is (1) internally logically inconsistent and (2) empirically unrealistic. The logical inconsistency is because the AD and AS curves represent two mutually exclusive theories of the relation between output and the price level in the same economy. The empirical unreality is that it assumes that, when there is excess supply, prices will fall, and furthermore, falling prices will return the economy to full employment. Neither of these assumptions is valid for our economy today. The paper focuses specifically on Mankiwâ€™s presentation of AD-AS in his best-selling textbook. JEL classification: A22, E10
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Bibliographic InfoArticle provided by Union for Radical Political Economics in its journal Review of Radical Political Economics.
Volume (Year): 42 (2010)
Issue (Month): 3 (September)
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aggregate demand; aggregate supply; logically inconsistent; empirically unrealistic;
Find related papers by JEL classification:
- A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
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