The paper by Michael Woodford challenges the conventional view that the price level is indeterminate under certain monetary regimes, such as an interest rate peg or a "free banking" regime. Woodford argues that the price level can remain determinate even in these cases, and proposes a "fiscal theory of the price level" to explain this phenomenon. This theory posits that the equilibrium price level is the level that makes the real value of nominal government liabilities equal to the present value of expected future government budget surpluses. The paper explores how fiscal policy affects the equilibrium price level, showing that changes in government fiscal policy can have significant wealth effects on the private sector, which in turn influence aggregate demand and the price level. Woodford demonstrates that the price level is determined by a set of equilibrium conditions involving fiscal variables, even in regimes with an endogenous money supply. He also discusses the implications of this theory for monetary policy and the role of fiscal policy in price level determination.The paper by Michael Woodford challenges the conventional view that the price level is indeterminate under certain monetary regimes, such as an interest rate peg or a "free banking" regime. Woodford argues that the price level can remain determinate even in these cases, and proposes a "fiscal theory of the price level" to explain this phenomenon. This theory posits that the equilibrium price level is the level that makes the real value of nominal government liabilities equal to the present value of expected future government budget surpluses. The paper explores how fiscal policy affects the equilibrium price level, showing that changes in government fiscal policy can have significant wealth effects on the private sector, which in turn influence aggregate demand and the price level. Woodford demonstrates that the price level is determined by a set of equilibrium conditions involving fiscal variables, even in regimes with an endogenous money supply. He also discusses the implications of this theory for monetary policy and the role of fiscal policy in price level determination.