".. in normal times the AD curve slopes down, we think, because other things equal a higher price level increases the demand for money, which drives up interest rates, which reduces desired spending. (In terms of IS-LM analysis, higher P leads to lower M/P which shifts LM left.) " YUP...PK
how far can we go with this ?
do higher prices increase the demand for money
or higher nominal income and or wealth ?
can money proxy both nominal wealth and nominal income and obligations
on H- toon earth
wealth ...net wealth that is ...is money
that stock may be distributed in ways that crunch lots of "firm activity "
creditors with not modeled wildly appreciating IOU's ...in real value
but also hold money appreciating in real value
may not spend "enough " more as money wealth in real terms appreciates
and debtors who hold "negative money "
their collateral or real income stream must rise in real terms as fast as deb rises or credit spigots get turned off and loans called etc
at best we see shrinking gross income increasingly drained by paying back nominally fixed IOUs
bad no ?
so its demand for income
oh lets
cut to the chase
its not more capital gains and higher nominal dividends and interest flows
but demand for higher take home wages and more transfer payments
