Econ ch.14

Classical Economists

emphasize that all prices eventually adjust and that the economy goes back to long-run equilibrium, at point C.

Keynesian Economists

See the return to long-run equilibrium as a delayed, unpredictable adjustment. This group stresses the importance of aggregate demand and calls for the government to speed the process back to full employment by shifting aggregate demand using fiscal and monetary policy.

Macroeconomic policy

Encompasses governmental acts that influence the direction of the overall economy.

Fiscal policy

Comprises the use of the government's budget tools-- government spending and taxes-- to influence the macroeconomy.

Monetary Policy

Involves adjusting the money supply to influence the economy.

Dodd-Frank Act

Signed in July 2010, it was the primary regulatroy response to the financial turmoil that contributed to the Great Recession.