Re: the aggregate demand curve

[Doug Henwood <dhenwood@xxxxxxxxx>]

I thought Keynes liked the idea of inflation subtly lowering real wages.
Is this a Marxist slander against him?

Doug

Doug Henwood [dhenwood@xxxxxxxxx]
Left Business Observer
212-874-4020 (voice)
212-874-3137 (fax)


On Mon, 14 Mar 1994 FICHTENBAUM@xxxxxxxxxxxxxxxxx wrote:

> Mike,
>
> I think you made a good point about the fact that the
> aggregate demand and supply curves are not independent.
> This has always bothered me and no one seems to have
> solved the problem to my satisfaction.
>
> The problem is that investment is a component of aggregate
> demand but it also affects aggregate supply since
> investment is the change in the capital stock.
>
> There are probably other problems with the theory.
>
> In my opinion one of the major problems in teaching
> macro theory is that most textbook models i.e.,
> neoclassical-Keynesian models argue that anticipated
> inflation does not matter or if it does matter it is
> because it affects the demand for money.  I always
> have trouble telling students with a straight face that
> if they anticipate inflation it doesn't matter.
>
> According to neoclassical-Keynesian theory inflation does
> not lower real wages.  In the real world inflation is the
> major mechnanism for lowering real wages and even
> principles of economics students who don't seem to understand
> much understand this fact.
>
> Rudy
>
>
>   =====================================================================
>   + Rudy Fichtenbaum        +  Internet Fichtenbaum@xxxxxxxxxxxxxxxxx +
>   + Department of Economics +  Bitnet   Fichtenbaum@xxxxxxxxxx        +
>   + Wright State University +  Telephone 513-873-3070/3071            +
>   + Dayton, OH 45435        +                                         +
>   +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++