Efficiency v. Equity – Efficiency means society gets the most that it can from its scarce resources. – Equity means the benefits of those resources are distributed fairly among the members of society
How the sr and lr differ In the Lr, prices are flexible and can respond to changes in S or D. In the Sr many prices are stuck at some predetermined level In the sr, monetary policy does have a potent effect on output and employment
Goal Develop the Solow Growth Model How much of the economy's output should be consumed today and how much should be saved for the future? Static analysis(Ch. 3)> Dynamic