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Keynesian Theory and AS/AD Analysis

Author

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  • Thomas I. Palley

    (AFL-CIO)

Abstract

This paper uses the AS/AD framework to illustrate competing approaches to (i) the dynamics of short run price-output adjustment, and (ii) the employment effects of nominal wage reductions. Nominal wages affect equilibrium outcomes if AD is subject to Pigou or Fisher debt effects. The Kaleckian model represents a variation on the neo-Keynesian model. Its principal contribution concerns the AD effects of the functional distribution of income, which introduces the mark-up as an important independent variable and focuses attention on capital-labor conflict.

Suggested Citation

  • Thomas I. Palley, 1997. "Keynesian Theory and AS/AD Analysis," Eastern Economic Journal, Eastern Economic Association, vol. 23(4), pages 459-468, Fall.
  • Handle: RePEc:eej:eeconj:v:23:y:1997:i:4:p:459-468
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume23/V23N4P459_468.pdf
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    More about this item

    Keywords

    AS AD; Neo Keynesian;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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