econ162b_41408 - 4/14/2008 11:10:00 AM Results 1) Classical...

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14/04/2008 10:10:00 Results 1) Classical Dichotomy Nominal variables can be separated from real variables in the classical  model.  o Nominal Variables: Measured in Prices and Dollars o Real Variables: Measured in Quantity o Real GDP is determined by aggregate supply, which depends on labor  markets.  o Price level is determined by aggregate demand which depends on  money supply. 2)Say’s Law Supply creates its own demand In the process of production, enough income is generated to purchase that  output, if not prices will adjust. Depends on the assumption that prices are very flexible. Spending adjusts to output (Is this similar to the invisible hand?) 3) Economic Growth Can be modeled as rightward sifts of the aggregate supply curve over time Production Function o Y= F (K,L) Determinants of economic growth: o 1) Quantity of Labor 
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This note was uploaded on 04/29/2008 for the course ECON 162B taught by Professor Christianson during the Spring '08 term at Binghamton University.

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econ162b_41408 - 4/14/2008 11:10:00 AM Results 1) Classical...

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