For one thing, inflation is not always and everywhere a monetary
phenomenon, as Uncle Miltie once put it. Inflation collapsed in Britain in
the early 1980s despite rapid money growth; the experience in the US was
similar, though the numbers were less dramatic. Lots of the credit growth
captured by the monetary aggregates went into financial and real estate
markets rather than goods. You can call those bull markets inflation, but
I don't think most mainstreamers would accept the label.
Doug
Doug Henwood [[EMAIL PROTECTED]]
Left Business Observer
212-874-4020 (voice)
212-874-3137 (fax)
On Fri, 11 Mar 1994 [EMAIL PROTECTED] wrote:
> Dear Penners --
>
> Is there anybody out there who can explain to me
> the logic of the aggregate demand curve, found in
> intro and intermediate macro texts?
>
> According to the books I've used, an increase in the
> price level, with the money supply fixed, shifts the LM curve
> leftward, resulting in a lower level of equilibrium output.
> But why would the price level increase if the money supply
> were constant. Doesn't this contradict the other proposition
> found in monst intro-to-macro textbooks that "inflation is
> always and everywhere a monetary phenomenon", since it must
> be accomodated by money creation?
>
> Is this AD curve as nonsensical as it sounds, or
> am I just missing something?
>
> Best, Ellen Frank
>
>
>
