By Santi K. Chakrabarti (auth.)
ISBN-10: 1349049352
ISBN-13: 9781349049356
ISBN-10: 1349049379
ISBN-13: 9781349049370
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Extra info for The Two-Sector General Theory Model
Example text
This is very explicitly stated by Keynes in a 1932 draft of a provisional chapter of the GT entitled 'Parameters of a Monetary Economy': 'There is obviously no necessity to distinguish between the price complex of currently produced assets and the price complex of the stock of assets' (Keynes XIII, p. 399). Froyen agrees, and indeed points out repeatedly, that the rise in equity prices encourages investment in the corresponding type of capital asset. Even though he does not say so, it is implicit in this that he agrees that the demand price of newly produced capital goods rises when there is a rise in equity price.
301). 3 But we may get Keynes's problem (involuntary unemployment) even if the auctioneer is there, for, as we have noted above, unemployment may develop because the rate of interest on money refuses to fall below a certain level. This in effect means that a market-clearing price vector which obeys the liquidity trap constraint does not exist. It is true that Keynes did not consider the liquidity trap as a serious possibility in practice. But he repeatedly pointed to it as, in theory, a possible constraint on investment and employment if money wages were to be fully flexible downwards.
It is clear that the basic model assumes that the clearing of capital goods market shown in figures 1 and 2 of Section 2 takes place separately for each capital good. 135). 13) shows that there is a distribution of total consumption expenditure among different consumer goods, the distribution pattern depending on the level of total consumption expenditure measured in wage-units. The basis for this equation is. , that 'corresponding to a given level of aggregate effective demand there is a unique distribution of it among different industries' (Ch.
The Two-Sector General Theory Model by Santi K. Chakrabarti (auth.)
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