ECON 102 Lecture Notes - Lecture 27: Classical Dichotomy, Neutrality Of Money, Positive Feedback

• School: U of M
• Department: Economics
• Course: ECON 102
• Professor: Miles Kimball

Document Summary

Lecture 27: long run vs short run & feedback loops. Long-run vs. short-run causality for the quantity equation mv=py. In the long-run, money is the ghost in ghost . Sr: in the short-run, money has magic: p is sticky, so changes in m and v raise y: many of the details about aggregate demand are about v. Long-run vs. short-run causality for the fisher equation r=i- . In the lr, money can only affect , not r, since r is determined by equilibrium in the lr loanable funds market. Lr: m -> -> r+ -> i. In the sr, is sluggish and slow to change. Sr: m -> i -> i- -> r. X - + > y means same direction effect. An increase in x causes an increase in y. A decrease in x causes a decrease in y. X - - > y means opposite direction effect. An increase in x causes a decrease in y.