Abstract
Seven years ago Friedman first argued that there is no long run trade-off between inflation and unemployment. Since then several authors have derived this result in a model which juxtaposes a neoclassical wage equation with a mark-ap price equation. The former iswhere ŵ and are the percentage rates of change of money wage rates and expected prices respectively, D and S are the demand for and supply of labour, λ is a postive and constant speed of adjustment, and a is a constant which is equal to unity when there is no money illusion.
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