Re: Re: intro macro text

[Peter Dorman]

In this case, AS/AD complicates the argument.  Why can't you just say that fiscal
policy overheated the economy, creating bottlenecks?

Peter

[EMAIL PROTECTED] wrote:

> Peter wrote as regards the use of AS/AD:
>
> >They prefer easy pseudo-explanation to the much harder real thing.
>
> Picking at random, the standard AS/AD explanation for the inflation that
> started at the end of the 1960s was that fiscal policy, in part Vietnam war
> spending, led to an expansion of AD at a rate that exceeded the shift to the
> right of the AS curve. Hence, inflation.
>
> Yes, this simplified matters greatly (ignores wage dynamics that likely lay
> behind increased wages) but what is the "harder real thing" explanation behind
> the 1960s inflation?
>
> Eric