The basic, universally taught macroeconomic model no longer works

The basic, conventional macroeconomic model has the following well-known characteristics: In the short term, there is a trade-off between unemployment and inflation. Demand-stimulating f iscal, monetary and wage policies push down unemployment and drive up inflation; In the long term, unemployment is equal to structural unemployment, inflation is determined by monetary policy and the real interest rate by the equilibrium between supply and demand for goods and services (between savings and investment). But this standard macroeconomic model no longer tallies with actual developments in OECD countries: Declining unemployment on the back of demand growth has not driven up inflation; Structural unemployment may be endogenous - dependent on economic activity - and not exogenous. D emand stimulus may therefore continue to drive down unemployment in the long term ; Inflation is not determined by monetary policy, even in the long term; Even in the long term, the real interest rate depends on monetary policy and not on the equilibrium between savings and investment. The basic macroeconomic model must therefore be completely revised.