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Implications Of Aggregate Demand Elasticity For The Phillips Curve

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  • Ben L. Kyer
  • Gary E. Maggs

Abstract

While the general relationship between the aggregate supply curve and the Phillips curve is recognized, the importance of aggregate demand and, in particular, aggregate demand elasticity, for the inflation-unemployment relationship has been untreated. We believe, however, that the elasticity of aggregate demand with respect to the general price level does have some significance for the short-run Phillips curve since, on a general level, the economy's equilibrium price level, inflation rate, real gross domestic product, and unemployment rate are determined jointly by aggregate supply and aggregate demand. The primary purpose of this paper then is to demonstrate with a graphical analysis the implications of aggregate demand elasticity for the Phillips curve.

Suggested Citation

  • Ben L. Kyer & Gary E. Maggs, 2004. "Implications Of Aggregate Demand Elasticity For The Phillips Curve," New York Economic Review, New York State Economics Association (NYSEA), vol. 35(1), pages 69-76.
    • Handle: RePEc:nye:nyervw:v:35:y:2004:i:1:p:69-76
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    References listed on IDEAS

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    1. Gambs, Carl M, 1974. "A Note on Macroeconomic Textbooks: The Use of The Aggregate Demand Curve," Journal of Economic Literature, American Economic Association, vol. 12(3), pages 896-898, September.
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