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CLASSICALCLASS - Classical/Monetarist LR Model Full...

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1 1 Classical/Monetarist LR Model Full employment Output in LR-Say’s 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. 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 2 In the News? 3 Course Issues HW 9 due Thursday Midterm Results Investment 2 – qs with 10 EC (assign 8B)
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