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Money, Output and Prices in the Long Run
AP Economics Mr. Bernstein Module 32: Money, Output and Prices in the Long Run March 2017
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AP Economics Mr. Bernstein
Money, Output and Prices in the Long Run Objectives - Understand each of the following: The effects of an inappropriate monetary policy The concept of monetary neutrality and its relationship to the long-term economic effects of monetary policy
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AP Economics Mr. Bernstein
Short-Run and Long-Run Effects of Increase in MS Counter-productive action can destabilize ie Expansionary Policy when at LR equilibrium Shifts AD right Both Y and P rise Eventually wages rise, SRAS shifts left, and in the long run prices rise but Y does not
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AP Economics Mr. Bernstein
Money Neutrality Changes in Money Supply have no effect on economy MS increase leads to price increase 1-for-1 And nothing changes in real terms…
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AP Economics Mr. Bernstein
Changes in MS and Interest Rates in the Long Run Increase in MS causes short-term rates to fall Also causes prices to rise …which increases MD (shifts to right)… …and returns interest rate to its original level
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