In this chapter you will learn -The classical theory of inflation causes effects social costs "Classical"-assumes prices are flexible markets clear. Applies to the long run. CHAPTER 7 Money and Inflation slide 1 CHAPTER 7 Money and Inflation slide 1 In this chapter you will learn ▪ The classical theory of inflation – causes – effects – social costs ▪ “Classical” - assumes prices are flexible & markets clear. ▪ Applies to the long run