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Growth as an objective of economic policy in the early 1960s: the role of aggregate demand

Johannes Schwarzer ()

Cahiers d’économie politique / Papers in Political Economy, 2014, issue 67, 175-206

Abstract: This paper sheds light on economic policy discussions in the early 1960s about whether there is an optimal level of demand to maximise the rate of growth. This discussion was influenced by the Cold War, which urged policy makers particularly in the USA to achieve higher rates of growth than the Soviet Union. As it was assumed that good demand management can damp the business cycle, regulating and deciding upon the level of demand pressure in the economy was regarded as an important tool for economic policy. The main debate therefore evolved around the question whether or not the economy should be run at high demand pressure and inflation to foster growth or if some slack in the economy and deflationary tendencies are a prerequisite for a prosperous growth path.

Keywords: Economic policy; growth; aggregate demand; trade-off; Phillips curve (search for similar items in EconPapers)
JEL-codes: B22 E61 O40 (search for similar items in EconPapers)
Date: 2014
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