Four major lessons to remember from this class:

Useful lessons learned from Neoclassical theory about the long run:

Lesson 1: In the long run, the amount of goods produced (GDP) is

determined by supply side of economy (available factors of
production and technology).

Implication: To raise our standard of living in the long run, the government
should focus on policies that promote productivity and growth.

Lesson 2: In the long run, any attempt to manipulate the economy through
monetary policy will only lead to inflation, and will not affect
the level of GDP, unemployment or any other real variable
(Classical Dichotomy).

Implication: The Federal Reserve should be very cautious about trying to

fight recessions. Watch out for inflation.

Useful lessons learned from Keynesian theory about the short run:

Lesson 3: In the short run, changes in demand side of economy affects

amount of goods produced.

Implication: The macroeconomy is not fully self-regulating. It can get

messed up in the short run and generate recessions.

Lesson 4: In short run, a rise in money supply does affect the level of
goods produced and other real variables.

Implication: If the Federal Reserve is careful, it can help prevent recessions

from getting worse. But it does have to be careful.