Abstract: This paper reports on the author's theoretical and empirical research which has supported the following propositions. First, the change in the rate of inflation from one year to the next depends upon the growth of the money supply less the current rate of inflation. The current unemployment rate does not significantly affect whether the rate of inflation will rise or fall. If the monetary authorities raise the rate of monetary expansion above the current rate of inflation, the latter will rise regardless of the slack in the economy. Second, the change in the unemployment rate from one year to the next depends upon: (a) the deviation of the current unemployment rate from its equilibrium value and (b) the growth of the money supply less the current rate of inflation. The first effect concerns wage flexibility and the second effect concerns the shift of the aggregate demand (C+I+G) curve.
Publication Year: 1978
Publication Date: 1978-08-01
Language: en
Type: article
Indexed In: ['crossref']
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