Theoretical Inconsistencies in the ADAS Model: Can the Model be Rehabilitated?

T. Windsor Fields and William R. Hart
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T. Windsor Fields: James Madison University
William R. Hart: Miami University in Oxford

Chapter 8 in Aggregate Demand and Supply, 1998, pp 107-136 from Palgrave Macmillan

Abstract: Abstract The aggregate demand and aggregate supply model is the dominant pedagogical device in virtually all intermediate macroeconomic textbooks. Central to this textbook model is the conventional aggregate demand (AD) curve derived from the ISLM framework. Price-induced changes in the real money supply shift the LM curve along an unchanging IS curve (absent a real balance effect) and map out levels of output at which aggregate demand and real output are equal. The resulting AD curve is then paired with an aggregate supply (AS) curve, derived from the labour market and a production function, to determine the equilibrium price level and rate of output.1

Keywords: Interest Rate; Price Level; Money Supply; Aggregate Demand; Good Market (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-26293-9_8

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DOI: 10.1007/978-1-349-26293-9_8

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