Macro Dynamics with a Job Guarantee – Part 6: Price Stabilization

The previous part of the series introduced a short-run relationship between prices and output, P(Y), that is in keeping with a Kaleckian or Keynesian understanding of demand-led economies. According to this view, within the economy’s capacity limits, output reflects demand while prices reflect cost. So long as supply conditions remain unaltered, variations in demand are met with variations in production at stable prices. But when spending goes beyond the economy’s current capacity to respond in quantity terms, price pressures emerge from the demand side.

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