Maybe this helps too:
I say "at least a little closer", because as I alluded to before we'd really need some factor markets.
Bob's is an improvement on Krugman's. He's got the changes in the marginal products right. But Krugman is still wrong on the total income point.
Negative supply shocks reduce total income. Who the hell cares that income equals expenditure? It's an aggregate supply shock!!!
Procrastinating on December 6, 2016
2 hours ago