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Unformatted text preview: One source of a change in nominal spending is a change in the money supply. This section develops our first theory of how money supply changes might cause real effects. The Price-Misperceptions Model is based on the idea that people are not always aware of what is happening to the average price level. 1. The Price-Misperception Model Barro Ch.15 PP1-5 2. Implications (i) real effect are only temporary—in the long-run money is neutral (as the data strongly suggests) (ii) real effects are more likely when the monetary authority keeps the money supply stable...
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This note was uploaded on 02/19/2011 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.
- Spring '08