Abstract
In Chapters 19 and 20 it was assumed that the price level was fixed so that any change in national income implied a change in only real national income. It was also assumed that real national income responded passively to changes in aggregate demand. These are major assumptions and a more modern view of the macro economy is that changes in aggregate demand might have a short term effect on real national income, but in the long term lead only to changes in the price level. This implies the existence of supply-side constraints in the economy and it is therefore no longer feasible to assume that aggregate supply simply responds passively to changes in aggregate demand. This chapter addresses these issues.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
