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The entire purpose of a demand uptick is to cause inflation and lower real wages. Google Keynesian economics - its a fix for unemployment and output gaps, not l
by yummyfajitas 11y ago
The entire purpose of a demand uptick is to cause inflation and lower real wages. Google Keynesian economics - its a fix for unemployment and output gaps, not low wages.
Given that we are already at the natural rate of unemployment, further demand creation is pointless anyway.
- yxhuvud 11y agoConsidering what happened with the ratio of people that participate in the labour market, further demand creation could very well pull some of those people in work though. As for Keynes, it is good to remember that he (later on - Keynes in the 20s hadn't reached these insights yet) didn't believe in a natural rate of unemployment (or well, he believed the equilibrium point was determined by a three dimensional equation rather than the two dimensional one that create a single natural rate).
- bsder 11y agoI would suggest you take your own advice and spend some time on Google. The purpose of stimulating demand is to break a "coordination failure" where falling demand->hiring cutbacks->cutting consumption->falling demand. That's Keynesian (neo-Keynesian actually). As for "natural rate of unemployment", there is no particular evidence that we are at one, and, in fact, there is lots of evidence that there is probably not a single "natural rate of unemployment" and mounting evidence against the concept in general.
- yummyfajitas 11y agoYou aren't disagreeing with me - the coordination failure you refer to is nominal rigidities. To disagree with me, demonstrate involuntary unemployment and outout gaps together with flexible wages.