non-traded goods and raises tax revenue both through a lump sum tax and through a distortionary tax on the production of … traded goods. Even though the tax on the production of traded goods is the only conventional distortion in the model, changes … exchange rate, the sectoral allocation of production, the level and composition of private consumption, the current account (in …

generate substantial price level inertia. (2) If price decisions are desynchronized, even anticipated movements in money will … usually have an effect on economic activity. It is however possible to find paths of money deceleration which reduce inflation … level. Goods early in the chain of production have more price and profit variability than goods further down the chain. (4 …

number of classical features. All markets clear instantaneously, there is no money illusion, and perfect foresight rules. The …

and monetary financing of government deficits caused by expansionary fiscal measures. Base money-financed tax cuts or … transfer payments -- the mundane version of Friedman's helicopter drop of money -- will always boost aggregate demand … consumption from the future to the present, by tilting the intertemporal terms of trade. An example is a cut in VAT today coupled …