Linking the Keynesian Cross and the Production Possibilities Frontier
Author(s)
Garrison, Roger W.
Abstract
In most principles-level textbooks, the production possibilities frontier (PPF) appears only in the preliminary discussions of scarcity. The older textbooks identify the alternative goods to be produced as guns and butter, some of the newer ones use more trendy examples such as beer and pretzels. George Kosicki ( 1991 ) noted the lack of continuity between the typical textbook discussion of scarcity and the subsequent development of microeconomic analysis. He went on to argue that we can achieve a fuller integration of economic principles by showing how the PPF underlies the supply curve. In this article, I point to a lack of continuity between that PPF-based discussion of scarcity and the introduction of basic macroeconomic relationships. A graphical linking of the Keynesian cross and the PPF helps keep the simple Keynesian model in perspective, allows for a more satisfying treatment of the concept of full employment, and provides a framework for identifying alternative schools of macroeconomic thought.
