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Aggregate Demand, Aggregate Supply and Economic Growth

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  • Amitava Krishna Dutt

Abstract

While mainstream growth theory in its neoclassical and new growth theory incarnations has no place for aggregate demand, Keynesian growth models in which aggregate demand determines growth neglect the role of aggregate supply. By assuming that the rate of technological change responds to labour market conditions, this paper develops a simple and conventional growth model that integrates the roles of aggregate demand and aggregate supply. The model shows how the long-run equilibrium growth rate of the economy, at which the unemployment rate is constant, can be affected by aggregate demand.

Suggested Citation

  • Amitava Krishna Dutt, 2006. "Aggregate Demand, Aggregate Supply and Economic Growth," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 319-336.
  • Handle: RePEc:taf:irapec:v:20:y:2006:i:3:p:319-336
    DOI: 10.1080/02692170600736094
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    References listed on IDEAS

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