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Thu May 4 08:03:30 2006 |
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<010001c66f17$d7417500$6501a8c0@richard> |
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To answer James Ahaikpor: I am sorry if my elliptical expression
"inflationary pressure" was confusing. I did not want to go in detail into a
first year lecture but here is a bit more detail that now seems called for.
If more income is earned and spent, that adds to aggregate demand (or as
Keynes would have put it Aggregate Consumption Expenditure). That has a
potential effect on both employment and the price level. How the effect is
divided between the two will depend on where the economy is in relation to
its potential (or full employment) income/output,.or as some text books put
it will, where the economy is on its aggregate supply curve . The key point
is that if there is an increase in paid employment, there will be effects
operating through increased market demand while if there is an increase in
unpaid employment, ceteris paribus, there will be no such effects -- which
is why, if we are interested in such macro variables as employment and the
price level, we want to measure only monetary transactions.
Richard G. Lipsey
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