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The Nature of the ADAS Model Based on the ISLM Model

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Author Info
B Bhaskara Rao (University of the South Pacific)

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Abstract

The aggregate demand and supply model (ADAS) is interpreted as a synthesis of the Keynesian and neoclassical models. It uses the ISLM model, without explaining its nature, to derive aggregate demand (AD). It is combined with an aggregate supply (AS) curve to explain price- inflation and output dynamics. This paper argues that neither the AD nor AS curve is conceptually the same as its microeconomic counterpart and ADAS is not a synthesis. In fact ADASimplies that discretionary policy is necessary and that price changes do not perform their traditional negative feedback function.

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Paper provided by EconWPA in its series Macroeconomics with number 0510001.

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Length: 15 pages
Date of creation: 01 Oct 2005
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Handle: RePEc:wpa:wuwpma:0510001

Note: Type of Document - pdf; pages: 15. Argues that the textbook ADAS model is in need of attention.
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Related research
Keywords: eynesian and neo classical models aggregate demand and supply monetary policy rule price adjustments stabilization policy

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E - Macroeconomics and Monetary Economics

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rao, B Bhaskara, 1986. "Alternative Aggregate Demand Functions in Macroeconomics," Australian Economic Papers, Blackwell Publishing, vol. 25(47), pages 261-64, December.
  2. David Romer, 2000. "Keynesian Macroeconomics without the LM Curve," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 149-169, Spring. [Downloadable!] (restricted)
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  3. Poole, William, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, MIT Press, vol. 84(2), pages 197-216, May. [Downloadable!] (restricted)
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