(DP 1980-02) A Simple Model of Economic Growth and Fluctuations

Abstract

This paper considers a simple Keynesian macroeconomics model that allows for growth and fluctuation. Expansion and contraction are assumed to be due to temporarily systematic shocks that propel the economy away from a long-run equilibrium growth path. When such shocks has dissipated their effects, the economy returns to equilibrium growth. The model is compatible with unemployment as the usual state of affairs and price inflation in the presence of growing unemployment.