We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
The Dynamics of Inflation and Employment in the Full-Employment Zone: A Theoretical Analysis.
- Authors
Laing, N.F.
- Abstract
The paper is concerned with an economy in which some sectors reach full employment before others as demand expands. The position of short-run equilibrium of employment and excess demand is determined by the intersection of the aggregate demand schedule and the short-run output function, which shows the level of output induced by different levels of aggregate demand. The dynamics of the short-run equilibrium position are exploded. It is shown that equilibrium forces due to relative price changes must predominate over disequilibrating forces due to the redistribution of income, in the absence of exogenous shocks and induced cost inflation. The latter is shown to be subject to a multiplier effect. The paper ends by drawing the policy implications of the analysis. It refutes the acceleration thesis by showing that the level of the real wage does not tend to change under excess demand and argues that if the economy is taken into the full employment zone forces will be set to work which tend to remove the bottlenecks.
- Subjects
AUSTRALIA; FULL employment policies; ECONOMIC equilibrium
- Publication
Economic Record, 1978, Vol 54, Issue 146, p219
- ISSN
0013-0249
- Publication type
Article
- DOI
10.1111/j.1475-4932.1978.tb00331.x