The name is absent

positive, that is,

≡ dΓ_{t =} M_t - D_{t > o}

^- dx_t [M_t (1 + x_t)]²

which establishes, for example, that a monetary contraction creates a relative short-
age of liquidity in the financial market.

Now, introducing (2.33) into (3.7) one gets

г = ^{Ubt Lt}

^t Uc_t c_t

Uc_t U-77(l-b_t)

ɪuɪʌ ɪʌ

^t U-7∕ (l-b_t)

Differentiating implicitly the previous equation yields

From (2.4) and (2.12), final output is a function that depends positively on
employment
(3.13)

A_tX^aL_t)^ v_tMF (t>)

Hence, a positive (negative) monetary shock increases (reduces) output in the short
run, that is,

The previous result and the fact that, in the short-run, the level of installed
equipment is fixed imply a change in the capacity utilization rate in the economy,
at the same time increasing the market power of those firms with idle resources.
More formally, this can be expressed as follows:

Corollary 1. In the short-run, an increase (decrease) in the equilibrium level of
employment, due to an unanticipated change in the rate of growth of the money
supply, rises (reduces) the mark-up, as well as the capacity utilization rate, whereas
it decreases (increases) the price relation between inter-mediate and final goods.

Proof. The capacity utilization rate was defined in equation (3.4) as

Given that in the short-run Y_t, the capacity level in the economy, is fixed and since
from the previous proposition final output increases, it follows immediately that
the capacity utilization rate increases.

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