TY  - JOUR
AU  - Farmer,Roger E. A.
TI  - Aggregate Demand and Supply
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13406
PY  - 2007
Y2  - September 2007
UR  - http://www.nber.org/papers/w13406
L1  - http://www.nber.org/papers/w13406.pdf
N1  - Author contact info:
Roger Farmer
UC, Los Angeles
Department of Economics
Box 951477
Los Angeles, CA 90095-1477
Tel: 310/825-6547
Fax: 310/825-9528
E-Mail: rfarmer@econ.ucla.edu
AB  - This paper is part of a broader project that provides a microfoundation to the General Theory of J.M. Keynes. I call this project 'old Keynesian economics' to distinguish it from new-Keynesian economics, a theory that is based on the idea that to make sense of Keynes we must assume that prices are sticky. I describe a multi-good model in which I interpret the definitions of aggregate demand and supply found in the General Theory through the lens of a search theory of the labor market. I argue that Keynes' aggregate supply curve can be interpreted as the aggregate of a set of first order conditions for the optimal choice of labor and, using this interpretation, I reintroduce a diagram that was central to the textbook teaching of Keynesian economics in the immediate post-war period.
ER  -