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NEW CLASSICAL ECONOMICS: A body of economic thought emerging in the last quarter of the 20th century based on greater reliance on voluntary market exchanges, a laissez faire approach to government policies, and recognition of the supply-side of the economy. New classical economics, as the name implies, is a rejuvenation of classical economics that dominated economic thought from the 1770s to the 1930s and was developed to counter Keynesian economics that was prevalent from the 1930s to the 1970s.
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Lesson 20: Federal Reserve System | Unit 4: Monetary Policy
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Page: 13 of 20
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Topic:
Overview: Graphs
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Expansionary monetary policy increases aggregate demand up to full employment and contractionary monetary policy decreases aggregate demand back to full employment.- Expansionary policy increases the money supply and shifts the AD curve rightward. This is used to correct a recessionary gap and achieve long-run equilibrium.
- Contractionary policy decreases the money supply and shifts the AD curve leftward. This is used to correct an inflationary gap and achieve long-run equilibrium.
- Note that monetary policy and interest rates are closely connected.
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LAW A generally accepted, verified, proven, fundamental scientific relation. A law is a scientifically certified, thoroughly verified, cause-and-effect relation about the workings of the world. It has been tested and retested through the scientific method. The law of demand, law of increasing opportunity cost, and law of diminishing marginal utility are three fundamental (and extremely important) economic laws of nature.
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GRAY SKITTERY
[What's This?]
Today, you are likely to spend a great deal of time at an auction hoping to buy either a T-shirt commemorating next Thursday or a birthday gift for your uncle. Be on the lookout for spoiled cheese hiding under your bed hatching conspiracies against humanity.
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This isn't me! What am I?
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Al Capone's business card said he was a used furniture dealer.
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"Failure will never overtake me if my determination to succeed is strong enough." -- Og Mandino, Author and Speaker
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AD
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