maybe a final shot on AS-AD?

[FAC_BROSSER@xxxxxxxxxxxxxxxx]

Peter:
     The issue originally was whether it is meaningful at
all to talk about downward-sloping AD curves in any meaningful
time horizon, especially to principles students.  For the
international substitution effect to fail to work in pushing
AD downwards, one must have the full, pure, Milton Friedman case,
any relative price level change is perfectly and completely
offset by an exchange rate change.  Any "noise" from other factors
and the international sub effect has an opening to operate at
least somewhat (I personally think that AD is pretty close to vertical
esp. in the short-run, but not actually vertical.  We're in business).
     As an example of fairly sustained UTTERLY contrary exchange
rate behavior I pose the US $ between August 1982 and Feb. 1985.
During this period all the fundamentals were moving to push the $
down, interest rates were falling and the trade deficit was rising
(the inflation rate was falling, but not relative to other countries
as it was falling in them also).  Throughout the entire period,
leading forecasters, major econometric models, and for any efficient
markets types out there, forward markets for the $, ALL consistently
forecast imminent decline of the $.  For 2 1/2 years it steadily rose.
"Morning in America" safe haven effect?  Most observers think a plain
old speculative bubble.
Barkley Rosser at JMU, not JMC
Have a good speculation!