[...] Prices and wages do not adjust instantaneously to clear markets whenever demand and supply are out of balance. Firms change price only irregularly in response to changes in demand; wages adjust only slowly as labour market conditions alter; and expectations are updated only slowly as new information is received. Such 'frictions' or 'rigidities' introduce time lags into the process by which changes in money lead to changes in prices. These lags in the adjustment of prices and wages to changes in demand--so-called 'nominal rigidities'--and lags in the adjustment of expectations to changes in inflation--'expectational rigidities'--generate short-run relationships between money, activity, and inflation. [...]