Aggregate Demand and Supply Reconsidered

Jose Encarnacion

No 199602, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: This paper defines an aggregate demand function based on portfolio balance with three assets (money, bonds and equities) and an aggregate supply function based on the supply behavior of a representative price-setting firm. The money wage is endogenous but the usual result is a short-period unemployment equilibrium. The model provides explanations of Phillips curve, stagflation and procyclical real wage phenomena. It also allows for the possibility of a continuum of full-employment equilibria.

Date: 1996-02
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Published as UPSE Discussion Paper No. 1996-02, February 1996

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Persistent link: https://EconPapers.repec.org/RePEc:phs:dpaper:199602

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