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(according to) monetarists
Changes in the money supply are the primary cause of changes in the price level
The Velocity of money (is the)
number of times per year the average dollar is spent on final goods and services
The real Business cycle theory (holds that business fluntuations are caused by)
Significant changes in technology and resource availability
New Classical economists (believe)
left alone, the economy gravitates to its full employment level of output
Rational expectations theory ( is based on the assumption that)
Both product and research markets are very competitive
Rational expectations theory (assumes that)
People behave rationally and that all product and resource prices are flexible both upward and downward
Mainstream economists (question the new classical assumption that)
wages and prices are equally flexable up and down
The traditional monetary rule
the annual rate of increase in the money supply should be equal to the potential annual growth rate of real GDP
Traditional monetarty rule believers say that the supply of money should be
increased at a constant rate each year
According to monetarists an expansionary fiscal policy is a weak stabilization tool because
goverment borowing to finance a deficit will raise the interest rate and reduce private investment
Theory of Rational expectaions concludes that
by reacting in its self interest to the expected effects of stabalization policy, the public tends to negate the impact of those policies
Comparative advantage , a good should be produced in thte nation where
its costs is least in terms of alternative goods that might otherwise be produced.
Primary gain from international trade-
more goods than would be attainable through domestic prodction alone
tariff studies show
cost of trade barriers exceed their benefits, creating an efficiency loss for society
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