Thy Kingdom is Divided: Fluctuating Tastes and Changes in Aggregate Demand

An extended Keynesian model provides insights not revealed by conventional models. An aggregate economy is conceptualised as comprising a heterogeneous amalgam of individuals with fluctuating demands. The consequences of these fluctuations are, initially, shown to be consistent with the predictions of orthodox models. However, a much richer explanatory power arises once inflationary expectations are incorporated. Predictions are then generated that have a greater correspondence with stagflation and/or the growth of inequalities, along with the development of an economy that is characterised by an increasing schism—the emergence of ‘the two nations’ and the growth of want amidst plenty.