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Aggregate Demand

In: Who Needs Jobs?

Author

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  • Pierre Lemieux

Abstract

Arecession can be defined as “a general, unwanted, self-perpetuating but temporary, mutual reduction in exchange.”1 In a recession, people want to buy and sell more than they are actually able to. The Great Recession of 2008– 2009 is an example; another one is the Great Depression, which started in 1929 (a depression is a deeper and longer recession). Less exchange implies fewer jobs and employment available on the market. Since the reduction in exchange is unwanted, the consequent unemployment is involuntary. In a recession, society is stuck under its production frontier. In these circumstances, Keynesians argue, the state can increase aggregate demand by creating jobs for the unemployed or with other forms of spending. Jobs created in the process would not have existed otherwise and are thus efficient, for they bring society back onto, or closer to, its production frontier. Does this objection, which was already alluded to in the previous chapter, make sense?

Suggested Citation

  • Pierre Lemieux, 2014. "Aggregate Demand," Palgrave Macmillan Books, in: Who Needs Jobs?, chapter 0, pages 151-159, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-35351-1_13
    DOI: 10.1057/9781137353511_13
    as

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