ABSTRACT
The forced-saving doctrine derives from the classical Quantity Theory of money. It explains the lagged adjustment of interest, rental, and wage rates behind changes in the level of prices and the short run consequences for output and employment. That analysis was commonplace until Keynes dismissed its validity and turned the Quantity Theory into a theory of interest rates and “output as a whole.” A.W. Phillips also did not employ the Quantity Theory to explain the level of prices but relied on changes in labor’s demand to explain changes in wage rates. This chapter explains the classical heritage of Phillips’s analysis
