The treatment of short-run monetary equilibrium in neoclassical monetary growth theory has been criticized as one of asset market equilibrium that leaves the status of real flows unclear. The paper shows this dichotomy to be the result of a stock-flow confusion. A resolution is attempted on the basis of which it is shown that the output market is in fact continuously equilibrated, and that neoclassical models can be employed for short-run analysis. © 1981.
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