Dependence of Aggregate Supply on the Main Factors Prices of Production

摘要

The article deals with the Keynesian aggregate supply model for the case of incomplete use of production factors. The amount of labour and capital involved in this model is determined at the labour and capital markets, respectively. The paper discusses the assumption by which the demand for labour and capital depends on the effective demand (coming from the goods market), and the labour supply is an increasing function of real wage, and the supply of capital-the increasing function of the real rental price of capital. It is shown that the labour supply in such a situation is an increasing function of nominal wage and a decreasing function of the nominal rental price of capital; capital supply is, on the contrary, a decreasing function of nominal wage and an increasing function of the nominal rental price of capital. Because of the above noted, generally, it is not known a priori in what direction the value of the Keynesian aggregate supply will change in case of the increase of prices level, when this growth is only associated with the increase of either nominal wage or the nominal rental price of capital. In the paper we prove that under certain conditions, for example, in case when indirect taxes included in the prices of products are other than zero, there are such combinations of simultaneous growth of nominal wage and nominal rental price of capital that it will lead to simultaneous growth of labour and capital supply and at the same time to the increase of aggregate supply. One of these combinations implies the equivalence of relative increments of nominal wage and the nominal rental price of capital.