1. How does the new Keynesian model differ from the earlier Keynesian de?cient-demand model? How does it differ from the modern classical one? Which of the three models would explain involuntary unemployment in a recession following a fall in aggregate demand?
2. "Every major in?ation has been produced by monetary expansion" (Friedman, 1968). Does this assertion hold for the NK model, whose equations do not even include a monetary aggregate as a variable?