The Nature of the ADAS Model Based on the ISLM Model
AbstractThe 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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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0510001.
Length: 15 pages
Date of creation: 01 Oct 2005
Date of revision:
Note: Type of Document - pdf; pages: 15. Argues that the textbook ADAS model is in need of attention.
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eynesian and neo classical models; aggregate demand and supply; monetary policy rule; price adjustments; stabilization policy;
Other versions of this item:
- B Bhaskara Rao, 2007. "The nature of the ADAS model based on the ISLM model," Cambridge Journal of Economics, Oxford University Press, vol. 31(3), pages 413-422, May.
- E - Macroeconomics and Monetary Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-08 (All new papers)
- NEP-HPE-2005-10-08 (History & Philosophy of Economics)
- NEP-MAC-2005-10-08 (Macroeconomics)
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