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  4. Summer 1995
  5. The Stories We Tell: A Reconsideration of AS/AD Analysis

Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

The Stories We Tell: A Reconsideration of AS/AD Analysis

  • David Colander
Journal of Economic Perspectives
vol. 9, no. 3, Summer 1995
(pp. 169–188)
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Abstract

This paper explains that the AS/AD model as currently presented in the tests is seriously flawed. It does not fulfill the minimum requirement of a model: logical consistency. Its component parts are derived from models that reflect different, and inconsistent, models of the economy. Moreover, the appropriate disequilibrium adjustment story that appropriately accompanies it is inconsistent with observed reality. In this alternative model, Keynesian adjustment occurs through shifting AS/AD curves along institutionally determined price level vectors rather than through movements along the AS/AD curves.

Citation

Colander, David. 1995. "The Stories We Tell: A Reconsideration of AS/AD Analysis." Journal of Economic Perspectives 9 (3): 169–188. DOI: 10.1257/jep.9.3.169

JEL Classification

  • A22 Economic Education and Teaching of Economics: Undergraduate