Teaching Keynes's Principle of Effective Demand Using the Aggregate Labor Market Diagram
The authors suggest a way to teach Keynes's principle of effective demand using a standard aggregate labor market diagram that should be familiar to students taking an advanced undergraduate course in macroeconomics. The analysis incorporates Kalecki's version of the effective demand model to show Keynesian unemployment as a point on the aggregate labor demand curve inside the aggregate labor supply curve. The well-known Keynesian policy conclusions apply. In particular, workers and firms are unable to restore full employment by reducing real wages, underlining how important is the macroeconomic duty of the monetary and fiscal authorities to manage aggregate demand growth.
Volume (Year): 34 (2003)
Issue (Month): 4 (December)
|Contact details of provider:|| Web page: http://www.tandfonline.com/VECE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/VECE20|
When requesting a correction, please mention this item's handle: RePEc:taf:jeduce:v:34:y:2003:i:4:p:333-340. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.