G. Main differences between NKs and Friedman 1. Friedman tells one story of imperfect labor markets. NKs add many more. In both kinds of models, monetary policy is irrelevant for real variables and all prices and wages are perfectly flexible. Affects the price level, inflation, and the nominal interest rate.
Taxation has the standard microeconomic impact.
The nominal view typically ignores the real channels of fiscal policy, seeing little evidence for inter-temporal labor supply or a significant labor supply response to income taxation. Taste shocks also theoretically possible, although rarely considered. In addition to real shocks, output also responds to unexpected money demand shocks and money supply shocks. Both views acknowledge the role of demographics. A positive shock to multi-factor productivity increases the marginal productivity of labor and therefore real wages.