chapter  XIX
11 Pages

Residual Uncertainty and Public Policy: Proportional, Integral and Derivative Control

Moreover, since most producers and most workers are price-setters in the sense that each day they go into the market offering their products or their labour at a predetermined money price or wage rate, the impact effect of a general reduction in money demand will be a fall in the quantity of goods sold and in the number of workers employed rather than in the money prices charged for the goods and for the labour. A vicious cumulative circle of reduction in real output, real employment and real income may develop.