🗊Презентация Monetary Policy and Fiscal Policy in the Very Short Run

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Monetary Policy and Fiscal Policy in the Very Short Run, слайд №1
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12
Monetary Policy and Fiscal Policy in the Very Short Run Learning objectives
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12 Monetary Policy and Fiscal Policy in the Very Short Run Learning objectives

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The Very Short Run
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The Very Short Run

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Monetary Policy
Monetary Policy: Any decision made by the Bank of Canada concerning the level of the nominal money stock.
The adjustment of the economy as a result of this monetary policy change is dependent on two general responses:
It must have the ability to lower interest rates.
Its ability to change real output in the very short run depends on the interest rate response in the IS curve.
Описание слайда:
Monetary Policy Monetary Policy: Any decision made by the Bank of Canada concerning the level of the nominal money stock. The adjustment of the economy as a result of this monetary policy change is dependent on two general responses: It must have the ability to lower interest rates. Its ability to change real output in the very short run depends on the interest rate response in the IS curve.

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Monetary Policy
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Monetary Policy

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Monetary Policy
Liquidity trap: A situation that arises when the LM  curve is horizontal because the interest elasticity of demand is infinite.
The Economist: Is Japan in a Liquidity Trap?
Modern version of the liquidity trap: When interest rates are so low that a central bank has no scope to lower them further.
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Monetary Policy Liquidity trap: A situation that arises when the LM curve is horizontal because the interest elasticity of demand is infinite. The Economist: Is Japan in a Liquidity Trap? Modern version of the liquidity trap: When interest rates are so low that a central bank has no scope to lower them further.

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Policy in Action
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Policy in Action

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The Goods Market and the IS Curve
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The Goods Market and the IS Curve

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	   A classical IS-LM model
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A classical IS-LM model

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Fiscal Policy and Crowding Out
A repeat of the IS curve from Chapter 11:
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Fiscal Policy and Crowding Out A repeat of the IS curve from Chapter 11:

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Fiscal Policy and Crowding Out
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Fiscal Policy and Crowding Out

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Fiscal Policy and Crowding Out
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Fiscal Policy and Crowding Out

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Fiscal Policy and Crowding Out
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Fiscal Policy and Crowding Out

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Fiscal Policy and Crowding Out
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Fiscal Policy and Crowding Out

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Fiscal Policy and Crowding Out
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Fiscal Policy and Crowding Out

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	   The Policy Mix
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The Policy Mix

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Monetary Policy and the Interest Rate Rule
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Monetary Policy and the Interest Rate Rule

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Monetary Policy and the Interest Rate Rule
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Monetary Policy and the Interest Rate Rule

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Monetary Policy and the Interest Rate Rule
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Monetary Policy and the Interest Rate Rule

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Monetary Policy and the Interest Rate Rule
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Monetary Policy and the Interest Rate Rule

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Monetary Policy and the Interest Rate Rule
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Monetary Policy and the Interest Rate Rule

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Monetary Policy and the Interest Rate Rule
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Monetary Policy and the Interest Rate Rule

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Monetary Policy and the Interest Rate Rule
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Monetary Policy and the Interest Rate Rule

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Monetary Policy and the Interest Rate Rule
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Monetary Policy and the Interest Rate Rule

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Chapter Summary
Monetary policy affects the economy, first by affecting interest rates and then affecting aggregate demand.
There are two extreme cases in the operation of monetary policy: The classical case and the liquidity trap. 
Taking into account the effects of fiscal policy on the interest rate modifies the multiplier results of chapter 8.
Fiscal policy is more effective the smaller the induced changes in interest rates and the smaller the response of investment to these interest rate changes.
Описание слайда:
Chapter Summary Monetary policy affects the economy, first by affecting interest rates and then affecting aggregate demand. There are two extreme cases in the operation of monetary policy: The classical case and the liquidity trap. Taking into account the effects of fiscal policy on the interest rate modifies the multiplier results of chapter 8. Fiscal policy is more effective the smaller the induced changes in interest rates and the smaller the response of investment to these interest rate changes.

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Chapter Summary (cont’d)
The two extreme cases, the liquidity trap and the classical case, are useful to show what determine the magnitude of monetary and fiscal policy multipliers.
A fiscal expansion, because it leads to higher interest rates, displaces, or crowds out, some private investment.
If the central bank wants to minimize fluctuation in the interest rate, it can conduct policy according to an interest rate rule.
If all the variation in income arises from fluctuations in the goods market, then the money supply rule reduces the variance of income.
Описание слайда:
Chapter Summary (cont’d) The two extreme cases, the liquidity trap and the classical case, are useful to show what determine the magnitude of monetary and fiscal policy multipliers. A fiscal expansion, because it leads to higher interest rates, displaces, or crowds out, some private investment. If the central bank wants to minimize fluctuation in the interest rate, it can conduct policy according to an interest rate rule. If all the variation in income arises from fluctuations in the goods market, then the money supply rule reduces the variance of income.

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The End
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The End



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