Criticisms of Aggregate Demand and Aggregate Supply and Mankiw’s Presentation

Fred Moseley
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Fred Moseley: Mount Holyoke College, South Hadley, MA, fmoseley@mtholyoke.edu

Review of Radical Political Economics, 2010, vol. 42, issue 3, 308-314

Abstract: This paper argues that the standard AD-AS framework as presented in intermediate macroeconomic textbooks is (1) internally logically inconsistent and (2) empirically unrealistic. The logical inconsistency is because the AD and AS curves represent two mutually exclusive theories of the relation between output and the price level in the same economy. The empirical unreality is that it assumes that, when there is excess supply, prices will fall, and furthermore, falling prices will return the economy to full employment. Neither of these assumptions is valid for our economy today. The paper focuses specifically on Mankiw’s presentation of AD-AS in his best-selling textbook. JEL classification: A22, E10

Keywords: aggregate demand; aggregate supply; logically inconsistent; empirically unrealistic (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:sae:reorpe:v:42:y:2010:i:3:p:308-314

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