This book studies unemployment and inflation in economic crises, first
considering the scenario of a demand shock in Europe. In that case,
monetary and fiscal interaction would cause widespread oscillations in
European unemployment and European inflation. And what is more, there
would be equally far-reaching fluctuations in the European money supply
and European government purchases. These monetary and fiscal
interactions would have no effects on the American economy. Second, it
examines the scenario of a supply shock in Europe, in which monetary and
fiscal interactions would have no effects on European unemployment or
European inflation; there would also be an explosion of European
government purchases and an implosion of the European money supply.
Monetary and fiscal interactions would produce uniform oscillations in
American unemployment and American inflation. Lastly, we would also see
an implosion of both the American money supply and American government
purchases.