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Unformatted text preview: 1 Classical/Monetarist LR Model Full employment Output in LR-Says Law Self-adjusting economy Vertical agg S curve at natural rate of unemployment/ natural rate level of output Fiscal Policy Complete crowding out G up I down no stimulus Just composition C versus I (and growth) Not needed self-regulating - full emp. 1 Monetary Policy M->P only thru Quantity Theory of Money Classical Dichotomy/ Neutrality of money Real factors determine real variables K,L->y,Unemp (natural rate of unemployment,y) Loanable Funds Theory S&I-> real interest rate=nominal i exp. inflation Classical Dichotomy Neutrality of Money M->P and nominal int rate, nom W NOT real vars In the News? 2 Course Issues Midterm Results EC coming Course suggestions Friday 3 Friday Cramer Krugman Keynes GT 2 Quick Keynesian Review 4 Keynes versus the Classics The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in 5 tempestuous seasons they can only tell us that when the storm is past the ocean is flat again....
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