inflation is everywhere and always a monetary phenomenon

big inflations will be stopped by big recession

money illusion is the source of the unemployment in the long-run

demand policies cannot move the actual unemployment rate permanently away from its equilibrium level

The economy is dichotomized in the short-run because of the Taylor rule

Wage-negotiations are subject to money illusion so that real wages would fall to an unsustainable level

Even if we could reduce unemployment to 0% today at a cost of an increase in inflation of 5%, there is no guarantee that underlying inflation in the economy would remain unchanged

The battle of the mark-ups determines wages and prices only so long as there is no supply shock

The OPEC cartel for oil prices collapses due to political disagreements.

Financial crisis results in a freezing of interbank lending

Drought destroys half of a country’s crops

Tax for energy use introduced to help reduce global emissions

that in the long-run the price level is assumed perfectly flexible

that under fixed exchange rates, the money supply is exogenous

.that the marginal propensity to import is assumed to be a constant fraction of GDP

.the principle of long-run PPP

(A) positive domestic inflation; (B) reduces domestic and foreign demand

(A) positive domestic inflation; (B) increases the domestic demand

(A) rising domestic inflation; (B) reduces domestic and foreign demand

(A) rising domestic inflation; (B) increases the domestic demand