SamuelRSmith on 16 June 2009
Although I'm not aware of staflation, (I am reading up on it now), one could argue that the results at the end of the recession could support either Keynesian or monetarist point of view, when both ad and as will be increasing rapidly, and we'll see what happens with inflation at that point.
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Interesting on the interest rate thing. I was just going by higher interest rates -> lower consumption -> less ad -> less inflationary pressure.
As for firms investing, I thought of it as higher inflation -> consumers become less predictable -> investment becomes riskier -> investment drops, waiting for inflation to come down, though it makes sense that they would continue investing but demanding a higher interest rate.
