The Principle of Effective Demand Effective Demand is a Point!
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UNIVERSIDAD ANTONIO NARIÑO
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http://purl.org/coar/resource_type/c_6501
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Ref: Papeles; Vol. 11 No. 21 (2019); 55-65
ISSN: 2346-0911
ISSN: 0123-0670
DOI: 10.54104/papeles.v11n21
ISSN: 2346-0911
ISSN: 0123-0670
DOI: 10.54104/papeles.v11n21
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This article builds a historical and theoretical journey in its proposal to question the derivation and therefore, the teaching of the IS-LM aggregate demand and supply model as well. An exhaustive presentation is made of each stage of definition, construction and formulation to form the IS-LM model (from Keynesian legacy in The General Theory of Employment, Interest and Money) to show how its construction suffers from a serious logical inconsistency. A reformulation is proposed in the construction and teaching of the model: “not only should the conventional model of aggregate supply and demand of textbooks be abandoned, but also the 45-degree Keynesian income-expense or cross scheme and of course the model IS-LM.”