From the labor supply equation, we have +儿v2-a1-g The intertemporal equation vields 00y=-(-Ex1-)+Eym1+(-pnk,(2) Finally, assume money demand as Assume flexible price, from(1) and (2) one can see that money policy is neutral 巧=y++(3) 7=p+PAa1+(-v)-pk,(4) wher=(-)(G+o)y=1/(+0)复 °Note:(3) implies first best allocation人 can be achieved by setting v=u Moreover, (4)indicates optimal policy 4 rule of real interest rate(mechanism).i Finally,(3)and(4)show this is a model F with prominent Keynesian properties. F• From the labor supply equation, we have • The intertemporal equation yields • Finally, assume money demand as mc (1 )(y a ) g v (1) t = + t − t − t − t t t t m − p = y −r (3) t at gt y =  + + ( ) (1 ) (2) t t t t 1 t t 1 g t y = − r − E  −  + E y + −  g + + • Assume flexible price, from (1) and (2) one can see that money policy is neutral: • Note: (3) implies first best allocation can be achieved by setting v = μ. Moreover, (4) indicates optimal policy rule of real interest rate (mechanism). Finally, (3) and (4) show this is a model with prominent Keynesian properties. (1 )(1 ) (4) t a t g t r =  +  a + − −  g   (v −)/( +), 1/(1+) • where