-Natural Rate of Unemployment
        The level of unemployment that keeps inflation constant.
        If unemployment is less than the natural one => inflation will increase.
         "today's low unemployment rate will spark tomorrow's inflation"
 
 
 

CHAPTER 6:  LONG-RUN EFFECTS OF MONEY

- Nominal interest rate  =  Real interest rate + inflation (expected)
- Federal Funds Rate and how the FED influences it (FOMC)
        Time paths of nominal and real interest rates after FED's decisions.
         => In the long run, there is no effect on the real interest rate, thus, no effect on            investment and GDP

-Relationship between money supply, inflation and economic growth:

IF velocity and economic growth are constant:  % changes in M   =   inflation
IF velocity is constant:  % changes in M   =   inflation  +  economic growth

=> which implies that if economic growth is 3%, Money Supply can then grow at 3% WITHOUT generating inflation.
=> "The New Economy" and implications for monetary policy