By the end of this chapter, you should understand:
- inflation targets for monetary policy
- the ii schedule
- the macroeconomic demand schedule MDS
- aggregate supply in the classical model
- the equilibrium inflation rate
- complete crowding out in the classical model
- why wage adjustment may be slow
- short-run aggregate supply
- temporary and permanent supply shocks
- how monetary policy reacts to demand and supply shocks
- flexible inflation targets
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