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assign3 - 1 Money and Banking N Sheflin Assignment 3 NOTES...

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1 Money and Banking N. Sheflin Assignment 3 NOTES : go light on lr growth material in chapter 10. Review of some key macro variables . Long-run versus short-run macro- Classical versus Keynesian Productivity and Long-run growth; Production function and growth accounting equation %chY=%chA+ax%chK+(1-a)%chL where a is capital share in of output Business Cycles The Aggregate Demand and Supply Macro Model: Keynesian (Short-Run) and Classical (Long-Run) Monetary theory – how the quantity of money influences the macroeconomy in both the short and long run. RBC, Monetarists READING Croushore 10 (Go light on lr growth material), 12 and a bit of 13 – just definitions of dsge, rational expectations etc, and the Phillips curve from 17 – Policy Perspective The Phillips Curve starting on page 378. . Also, look at my notes below as the book is rather skimpy on some of this. Meet John Maynard Keynes at: http://www.bized.co.uk/virtual/economy/library/economists/keynes.htm http://www.spartacus.schoolnet.co.uk/TUkeynes.htm And Milton Friedman at http://www.bized.co.uk/virtual/economy/library/economists/friedman.htm And glance at Paul Krugman’s critique and explanation of macroeconomics at http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?_r=4&partner=rss&emc=rss&pagewanted=all KEY POINTS aggregate demand: – shifts and movements along; slope; C,I,G,NX; Aggregate Supply: shifts and movements along; short-run versus long-run; Keynesian versus Classical models and policy. SHORT-RUN AND LONG-RUN AGGREGATE DEMAND AND SUPPLY MODELS. p – overall price level; y – real output; D demand; S -supply; C -consumption; I -investment (plant and equipment); G government spending; i=interest rate; $=dollar exchange rate i or r = interest rate Keynesian Model: short-run (0-3 years), below full-employment economy o Aggregate D&S
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