Abstract This chapter explores the dynamics of a one-sector economy with (i) A generalized Phillips curve, letting wages or changes in wages be affected by the unemployment rate. (ii) Wages (including possibly the profile of future expected wages) affect not just savings but the capital intensity of newly installed machines (once machines have been constructed, there is limited substitutability, limited flexibility in increasing output by increasing inputs). Even when aggregate savings does not depend on the distribution of income, there can be non-convergent oscillations. And even when we drop the putty clay assumption the economy exhibits oscillatory behavior. In the limiting case where there is a fixed coefficients production function, there is a limit cycle. In the more general case, the economy eventually converges to a steady-state equilibrium. For some specifications of the Phillips curve, it may be possible for the government by hiring workers directly to lower the equilibrium unemployment rate.