Explaining the aggregate price level with Keynes's principle of effective demand

Jochen Hartwig

The conventional wisdom about Keynes's Principle of Effective Demand is that it states something about quantities. It is widely held that the Principle determines the levels of output and employment in a world not governed by Say's Law. This paper argues that the Principle of Effective Demand goes beyond this to explain not only "real" activity levels but also the aggregate price level. A variant of the Post Keynesian D/Z-model is brought together with Marxian reproduction schemes to derive this result. -- Effective demand ; multiplier ; Post Keynesianism ; D/Z-model ; reproduction schemes

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Year of publication:	Nov. 2004 ; [Elektronische Ressource]
Other Persons:	Hartwig, Jochen (contributor)
Publisher:	Zürich : KOF
Subject:	Gesamtwirtschaftliche Nachfrage \| Aggregate demand \| Multiplikator \| Multiplier \| Preisniveau \| Price level \| Postkeynesianismus \| Post-Keynesian economics \| Theorie \| Theory