... the many schools of thought on the issue, the two that are most widely documented are the "supply-side shock" argument and the effects of monetary and fiscal policy. During the course of this essay I will examine the effects that both supply and demand side shocks had on the post-war British economy, concluding that both factors were important in not only causing the 1921 U.K. recession, that brought about both high unemployment and violent deflation, but also in contributing to the continuing volatility and underperformance of the British economy throughout the interwar years. Supply side theory Aggregate supply shows the interaction between price level and output in the economy. The aggregate supply relation is typified by the equation: P = Pe(1+()F(1 - Y/L,z) Where P is the price level, Pe is the expected price level, ( is the mark-up a producer charges, Y/L represents labour productivity and z is a "catchall" variable that encompasses all ...

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