This paper proposes a new model accounting for the delayed effect of monetary shock on output. The
key feature of the model is to distinguish a variety of margins (i.e., inventory adjustments, hours per
worker, work efforts and employments) on which firms adjust output in response to macroeconomic
shocks. When these multiple margins are properly introduced to an otherwise standard modern
monetary business cycles model, the interplay between inventory adjustments and the one-period lag in
adjusting employment can produce the hump-shaped response of output to monetary shocks. More
importantly, this can be done even without relying upon the habit persistence model that has been
decisively rejected in recent papers by Dynan (2000) and Flavin & Nakagawa (2004).