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Aggregate Demand, Aggregate Supply and Economic Growth

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  • Amitava Krishna Dutt

Abstract

While mainstream growth theory in its neoclassical and new growth theory incarnations has no place for aggregate demand, Keynesian growth models in which aggregate demand determines growth neglect the role of aggregate supply. By assuming that the rate of technological change responds to labour market conditions, this paper develops a simple and conventional growth model that integrates the roles of aggregate demand and aggregate supply. The model shows how the long-run equilibrium growth rate of the economy, at which the unemployment rate is constant, can be affected by aggregate demand.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 20 (2006)
Issue (Month): 3 ()
Pages: 319-336

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Handle: RePEc:taf:irapec:v:20:y:2006:i:3:p:319-336

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Related research

Keywords: Growth; aggregate demand; aggregate supply; technological change; Keynesian growth models; hysteresis;

References

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  11. Martin, Philippe & Rogers, Carol Ann, 1997. "Stabilization Policy, Learning-by-Doing, and Economic Growth," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 152-66, April.
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