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Teaching Keynes’s Principle of Effective Demand within the Real Wage vs. Employment Space

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  • Corrado Andini

Abstract

This paper reviews several models for teaching Keynes’s principle of effective demand with a special focus on a framework that is familiar to advanced undergraduate students of macroeconomics: the real wage vs. employment space. It is argued that existing approaches to teaching Keynes’s principle of effective demand reflect a tension between two goals: being true to Keynes and translating the effective-demand principle into a story about real wages and employment within a single graphical space. Our main contribution consists of presenting an extended version of a model originally proposed by Lavoie (Rev Radic Polit Econ, 35(2):166--182, 2003), which seems to be a reasonable compromise between these two goals.

Suggested Citation

  • Corrado Andini, 2009. "Teaching Keynes’s Principle of Effective Demand within the Real Wage vs. Employment Space," Forum for Social Economics, Taylor & Francis Journals, vol. 38(2-3), pages 209-228, January.
    • Handle: RePEc:taf:fosoec:v:38:y:2009:i:2-3:p:209-228
    DOI: 10.1007/s12143-009-9035-z
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