My two Keynsians

[Archaea]

What are we going to do when employment and inflation starts to rise again?

Prove to me in today's world how nominal variables affect real variables?

[ChinoCoug]

Originally Posted by Archaea

What are we going to do when employment and inflation starts to rise again?

Raise the federal funds rate, cut spending and let them Bush tax cuts for the wealthy expire.[/quote]

Prove to me in today's world how nominal variables affect real variables?

Firms can't tell whether the increase in the price for their goods is due to greater demand for their goods, or a general inflation, so there is a lag in their adjusting their production levels to the new price.

I'm still at a loss as to what you are. Now you sound like a neutralist. If you think nominal prices don't matter, what good is monetary policy? You and I both believe it's superior to fiscal policy (we are all Friedmanites now).