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Unformatted text preview: run (labeled with 1s) and the long run (labeled with 2s). Money affects output and L in the short but not the long run. This is true of all shifts in AD, of course, but in the case of fiscal policy an increase in G crowds out C and I, whereas monetary policy has no effect on any real variable in the long run; this is known as the long-run neutrality...
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- Fall '08