ABSTRACT
This chapter examines make inflation and aggregate supply (AS) explicit components of the policy analytic framework. A simple version of the standard macroeconomic framework comprises the joint display of frameworks for aggregate demand, AS, and production. The money stock indicates the volume of readily accessible money that is circulating in the economy. The notion that expanded use of such items would hike greenhouse gas emissions and deepen fossil fuel dependency went unnoticed by policy-makers. Had the environmental macroeconomic framework been adopted for the recovery from the global financial crisis, then policy-makers would have been prompted to search for policy initiatives that target the goal of sustainability. The subject of wage policy also would have been considered because wage reductions can help attain sustainable income and employment targets. The chapter discusses the observation that the persistence of inflation despite the prevalence of recessionary conditions can be explained when an environmental macroeconomic framework is considered.
