The Comparative Statics of Effective Demand |
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Authors: | Jochen Hartwig |
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Affiliation: | 1. Chemnitz University of Technology, Chemnitz, Germany;2. KOF Swiss Economic Institute, ETH Zurich, Zurich, Switzerland |
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Abstract: | Keynes introduces the term ‘effective demand’ in Chapter 3 of the General Theory as designating the point of intersection of two functions: the ‘aggregate demand function’ (D) and the ‘aggregate supply function’ (Z). For the first time in the literature, I here use specific functional forms for the D and Z functions and run numerical simulations which allow study of the comparative statics of the model in the face of various ‘shocks’. The demonstration of how the D/Z model actually works will hopefully prove useful for future students of the economics of Keynes. |
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Keywords: | Effective demand D/Z model Keynes |
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