Macroeconomic models provide a framework for relating key aggregates. Classical and Keynesian models diverge as to how quickly prices and wages adjust to eliminate the twin excess supplies of a downturn – a glut in product markets and unemployed workers in labor markets. The aggregate demand / aggregate supply model is a model of equilibrium in the Classical spirit in which prices adjust to clear markets and the economy rebounds spontaneously from shocks to recover its potential growth path. In contrast, the income–expenditure model, based on the work of Keynes, depicts an economy that is prone to sustained sub-optimal performance. In this model, wages and prices fail to adjust to achieve full employment in any timely fashion, and aggregate demand thus falls short of inducing production at potential. Finally, the IS–LM (interest/saving-liquidity/money) model elaborates on the Keynesian framework to highlight the role of the interest rate in policy, and the Mundell–Fleming extension of the model brings in a foreign sector with a role for the exchange rate.

The topic considered in Chapter 3 is an epic strain in the Tour, following the model first suggested by E.M.W. Tillyard. It attempts to show how the work fulfils the requirements of the genre, as defined by Tillyard, which include high seriousness, amplitude, a predetermined organization, and a choric quality, through which the author is able to “express the feelings of a large group of people living in or near his own time.” The chapter identifies a number of features in the Tour that mimic epic properties, among them the opening statement of a running theme; the motif of a journey comparable in particular ways to a heroic quest; a descent into the underworld; catalogues of past deeds; episodes which the traveler encounters natural winders; discussion of local myths; and the use of sententiae. It is argued that the nation becomes the hero of a narrative designed to aggrandise the future glories of Britain.