ECON 102 Study Guide - Final Guide: Classical Dichotomy, Interest Rate, Capital Flight
Document Summary
As (cid:3450) total amount of g/s produced. Ad (cid:3450) total amount of g/s bought. Lras straight because money neutrality says that price cannot be affect rgdp. Know how to shift the as/ad curves. Monetary/fiscal policy only way to fix economy problems. P(cid:3449) = (1/p)(cid:3451) = md(cid:3449) = c(cid:3451)= y(cid:3451) To push the ad curve right we need ms(cid:3449) bc p(cid:3449) inflation p(cid:3449) (cid:3448) ms(cid:3449) (cid:3448) (cid:3449) loans (cid:3448) fed reserve (buys bonds or decreases rates) Classical dichotomy: separation of nominal and real variables. Also called money neutrality and holds up in the long run.
