CLASSICALCLASS - 1 Classical/Monetarist LR Model Full...

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Unformatted text preview: 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 – no (and probably bad) ¢ 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 –P only ¢ 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 Krugman gt / malkiel In the News? 2 Course Issues ¡ Invgame 3 ¡ Midterm ¡ EC-Ip’s book ¡ Consumption Function 3 ¡ Consumption Function ¡ Assign/HW9 due Thurs 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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CLASSICALCLASS - 1 Classical/Monetarist LR Model Full...

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