The aggregate demand (AD)/aggregate supply (AS) framework as presented in almost all textbooks is logically inconsistent, because it seperates the demand side from the supply side. Due the the circular flow nature of the macroeconomic process, however, production/supply and income/demand cannot...

This paper questions the validity of using the aggregate demand (AD) and aggregate supply (AS) framework for analysing macroeconomic issues. AD derived from the Keynesian income-expenditure approach cannot be reconciled logically with AS derived from the profit maximization postulate in...

This paper analyses the dynamic interaction between profit maximization and aggregate demand through two alternative theories of price and output adjustment. According to the neoclassical interpretation, excess aggregate demand drives up price, which in turn reduces the real wage rate to induce...