money supply contracts, businesses will respond by laying off workers. In this way, the theory accounts for involuntary unemployment. The disequilibrium between the supply and demand for money exists as long as nominal supply does not automatically adjust to meet the nominal demand. Monetary-disequilibrium is a short-run phenomenon as it contains within itself the process by which a new equilibrium is established i.e. through changes in the price level. If the demand for real balances changes, either the nominal money supply or price level can adjust to monetary equilibrium in the long run as seen from the figure. From the definition of monetary-disequilibrium movements in the demand for money are responded to the changes in the real money supply through adjustments in the nominal money supply as seen from the movement from point O to A in the figure and not the price level (movement from O to A' in the figure). The demand for money means demand to hold real cash balances. If the money supply is increased to an amount beyond which the public desires to hold (from MS to MS'), this is interpreted as a movement from O to A, as illustrated in our figure. With the increase in supply of money, people find themselves with larger money balances than they wish to hold and thus reside temporarily at point A. If we assume that there has been no change in the demand for money, these excesses will be spent on goods, services or financial assets thereby increasing their prices, leading to a movement from point A to new equilibrium point B. The increase in the aggregate price level (P* < P') is associated with excess supplies of money which reflects these individual increases. The price level continues to rise with the increase in spending of the excess money balances and eventually reaches point B where the higher nominal supply of money is held at higher price (1/P', where P' > P*). In the long run any supply of money is an equilibrium supply. The long-run movement from equilibrium O to B is shown in the figure. Early monetary-equilibrium theory Swedish economist Knut Wicksell (1898) was one of the main propagators of the theory. He was primarily concerned with the behavior of the general price level, as influenced by interest rates. As described by Gunnar Myrdal in 1939, the definition given by Wicksell was based on the