Abstract
In our previous article “All the reasons to reject the AS-AD model” we focused on the criticisms of the AS-AD (Aggregate Supply-Aggregate Demand) model. In this second part of the article “All the reasons to reject the AS-AD model” we intend to move from the criticisms leveled at the AS-AD model to proposals for its modification.
We thus arrive at the downward-sloping competitive aggregate supplì curve CAS and the equally downward-sloping competitive aggregate demand curve CAD. Their intersection, unlike traditional approaches, does not result in the reassuring «natural equilibrium» of full employment, but rather in the problematic «competitive equilibrium» of full unemployment. The article concludes with the shifts in the «competitive equilibrium» resulting from economic policies, whose disruptive effects are very different from traditional ones.
We would like to point out that this article has much in common with the macroeconomic model of overproduction we developed previously (1991-2025), by examining in depth the price movements in the competitive context which were not sufficiently considered in the latter.