ABSTRACT
The intersection of the aggregate supply and demand curves indicates both the equilibrium level of physical output and the equilibrium level of prices. If an autonomous change in "real" demand occurs, it will shift the aggregate demand curve to intersect the aggregate supply curve at a new equilibrium position. With money wages and prices rising at the same rate, there will be no reduction in real wages and therefore no redistribution effect to restrain the upward movement of the aggregate demand curve. Both curves will be shifting upward simultaneously. The excess supply of labor will persist, money wages and prices will continue to fall, and the downward movement of the supply and demand curves will go on. The general conclusion of this analysis is that if money wages and prices are free to rise or fall to any necessary extent, a full equilibrium will be reached only when the conditions are satisfied.
