By the end of this chapter, you should understand:

1. inflation targets for monetary policy
2. the ii schedule
3. the macroeconomic demand schedule MDS
4. aggregate supply in the classical model
5. the equilibrium inflation rate
6. complete crowding out in the classical model
7. why wage adjustment may be slow
8. short-run aggregate supply
9. temporary and permanent supply shocks
10. how monetary policy reacts to demand and supply shocks
11. flexible inflation targets