Economic Review

Contrary to the strawman “classical” model of the textbooks, the original classical economists did not believe that money-stock changes affect only the price level and not real output and employment. Most classicals saw money as having powerful short-run real effects and perhaps some residual long-run effects as well. Concern for money’s impact on real activity strongly influenced the classicals’ views of the desirability or undesirability of monetary expansion and contraction.