With regard to the Lipsey-Ahiakpor exchange, Richard, I believe, is   
making the  logically (or mathematically) correct point that, with   
unemployment, an exogenous increase in the quantity of money which   
causes a subsequent increase in aggregate demand need not cause an   
increase in prices. It depends on whether there are idle resources.   
James, I think, makes one crucial point about aggregate demand -- that   
it might result from something besides an increase in money. (Supply   
creates its own demand?)  
  
At least other point needs to be made. It is that the idle resources   
might also be the result of some factor that mitigates the causal   
sequence that Richard describes. Perhaps we should be reminded of the   
final lesson of the Phillips Curve episode in the history of thought. It   
is that the psychological factors that make a government policy appear   
desirable on the basis of statistical analysis may change. More   
specifically, the entrepreneurial errors made by workers (the money   
illusion) got corrected and a strategy that worked for a time to achieve   
its objectives became not only ineffective but detrimental.  
  
You can fool some of the people some of the time...  
  
http://en.wikipedia.org/wiki/Phillips_Curve  
  
  
Pat Gunning