IDEAS home Printed from https://ideas.repec.org/h/pal/palchp/978-0-230-37412-6_4.html
   My bibliography  Save this book chapter

Aggregate Demand and Price Adjustment: Pigou versus Fisher

In: Post Keynesian Economics

Author

Listed:
  • Thomas I. Palley

    (New School for Social Research)

Abstract

Mainstream classical macroeconomics challenges Keynes’ claim to have demonstrated the possibility of equilibrium involuntary unemployment in a perfectly competitive economy with flexible prices and nominal wages. This challenge is predicated on the Pigou (1943) effect, according to which decreases in the general price level increase the real value of nominally denominated assets, thereby giving rise to a positive wealth effect on spending. It is also supported by the Keynes effect (1936), whereby decreases in the general price level increase the real money supply and lower interest rates. As a result nominal wage reduction, through its impact on product prices, can increase aggregate demand and restore full employment.

Suggested Citation

  • Thomas I. Palley, 1996. "Aggregate Demand and Price Adjustment: Pigou versus Fisher," Palgrave Macmillan Books, in: Post Keynesian Economics, chapter 4, pages 41-70, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-37412-6_4
    DOI: 10.1057/9780230374126_4
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:palchp:978-0-230-37412-6_4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.