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The Nature of the ADAS Model Based on the ISLM Model

  • B Bhaskara Rao

    (University of the South Pacific)

The aggregate demand and supply model (ADAS) is interpreted as a synthesis of the Keynesian and neoclassical models. It uses the ISLM model, without explaining its nature, to derive aggregate demand (AD). It is combined with an aggregate supply (AS) curve to explain price- inflation and output dynamics. This paper argues that neither the AD nor AS curve is conceptually the same as its microeconomic counterpart and ADAS is not a synthesis. In fact ADASimplies that discretionary policy is necessary and that price changes do not perform their traditional negative feedback function.

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Paper provided by EconWPA in its series Macroeconomics with number 0510001.

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Length: 15 pages
Date of creation: 01 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0510001
Note: Type of Document - pdf; pages: 15. Argues that the textbook ADAS model is in need of attention.
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  1. Poole, William, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, MIT Press, vol. 84(2), pages 197-216, May.
  2. David Romer, 2000. "Keynesian Macroeconomics without the LM Curve," NBER Working Papers 7461, National Bureau of Economic Research, Inc.
  3. Hahn, Frank, 1978. "On Non-Walrasian Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 45(1), pages 1-17, February.
  4. Benassy Jean-pascal, 1987. "Non-walrasian equilibria money and macroeconomics," CEPREMAP Working Papers (Couverture Orange) 8725, CEPREMAP.
  5. Rao, B Bhaskara, 1986. "Alternative Aggregate Demand Functions in Macroeconomics," Australian Economic Papers, Wiley Blackwell, vol. 25(47), pages 261-64, December.
  6. Felderer, Bernhard & Homburg, Stefan, 2005. "Makroökonomik und neue Makroökonomik," EconStor Books, ZBW - German National Library of Economics, number 92556, April.
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