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The Fall and Rise of Keynesian Economics$
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John Eatwell and Murray Milgate

Print publication date: 2011

Print ISBN-13: 9780199777693

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780199777693.001.0001

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Controversies in the Theory of Employment

Controversies in the Theory of Employment

(p.286) 14 Controversies in the Theory of Employment
The Fall and Rise of Keynesian Economics

John Eatwell

Murray Milgate

Oxford University Press

This chapter outlines controversies in the theory of employment. It focuses on four elements that characterize the approach to examining the debate of distinction between short-run and long-run analyses of unemployment. The first approach explains that unemployment is based on rigidities or imperfections in the operation of the price mechanism, while the second approach implies that unemployment must be expressed in terms of either short-period equilibrium or disequilibrium. The third and fourth approach affirms that rigidities are imposed on a perfectly functioning market mechanism and that the long-run equilibrium for the economy is characterized by long-run normal prices and dual long-run normal outputs.

Keywords:   theory of employment, unemployment, price mechanism, short-period equilibrium, disequilibrium, market mechanism, long-run equilibrium

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