Classical and Keynesian Unemployment in the IS-LM Model

Jean-Michel Grandmont ()

Chapter 4 in Monetary Theory and Economic Institutions, 1987, pp 66-94 from Palgrave Macmillan

Abstract: Abstract The recent literature on equilibrium with quantity rationing has cast a new light on the origins and the cures of unemployment. By reconsidering the traditional Keynesian elementary multiplier model, this approach has in particular brought to the forefront of the analysis the important distinction between Keynesian unemployment, which results from a lack of demand, and classical unemployment, which comes from too high a real wage. (The first attempts to model these different sorts of unemployment are due to Solow and Stiglitz, 1968; Barro and Grossman, 1971, 1976; Younès, 1970, 1975; Benassy, 1973, 1975, 1977, 1982a. The term classical unemployment has been coined by Malinvaud, 1977, in his thorough study of a similar model.)

Keywords: Interest Rate; Real Wage; Aggregate Demand; Excess Demand; Good Market (search for similar items in EconPapers)
Date: 1987
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Working Paper: Classical and keynesian unemployment in the is-lm model (1982)
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DOI: 10.1007/978-1-349-08781-5_4

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