The world is described by individuals that maximize intertem poral utility by choosing between physical capital, bonds, real money balances, leisure and consumption. The intertemporal utility function is given by 2:10 pr(Ct, mt, It) where p > 0, Ct is consumption, mt is real money balances, and lt is leisure. Firms maximize profits choosing labour and physical capital. Produc tion is constant returns to scale and it is given by Y}: AKENE'\