Recent actions taken by OPEC have increased sharply the relative price of energy in the five industrial countries examined in this article. Monetary growth followed a generally restrictive pattern in 1979 to 80, similar to that in 1973 to 74. As a consequence of both OPEC actions and reduced money growth, the economies of Canada, Germany, Japan, the United Kingdom and the United States have been burdened with declines in real gross national product (GNP) and rising rates of inflation during the past two years. In Canada, the United Kingdom and the United States, unemployment rates have remained abnormally high or have increased in recent years. Periods of declining economic activity and rising prices create problems in selecting the appropriate monetary policy response. A sharp, prolonged decrease in money growth intended to inhibit upward pressure on prices due to rising energy prices will aggravate the decline in real economic activity. On the other hand, an increase in money growth intended to offset the decline in real GNP will contribute to even greater future inflation. One recent study indicates that, with no change in money growth, rising energy prices will affect the rate of inflation only temporarily. Moreover, increasing the ratemore » of growth of money only temporarily reduces the increased unemployment that accompanies the slowdown. This suggests that stable money growth may well be the correct response to such supply shocks. 13 references, 1 table.« less