Rational expectations macro models with possible steady-state inflation andunemployment

Consider an economy exhibiting the conventional IS-LM relationships, Phillips curve type price adjustment equations, and rational inflationary expectations. We demonstrate that starting from the disequilibrium situation of either the Keynesian unemployment or the demand inflation type in which money is nonneutral, the economy converges to an equilibrium situation in which all markets clear. On the other hand, starting from the disequilibrium situation of the classical unemployment type in which money is nonneutral, the economy converges to a state of rest in which the goods and the labor markets remain out of equilibrium. However, money is neutral at this state of rest.