ECON 1102 Lecture Notes - Lecture 17: Money Supply, Output Gap, Market Clearing
15 Oct 2018
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Econ 1102 - lecture #17 - chapter 30. Inflation targeting: 1991-2000: in spite of heavy political pressure to lower interest rates, the bank stood by its tight monetary policy. In 1991, it formally announced inflation-control targets for the next several years: with the appointment of governor gordon thiessen in 1994, the bank continued its policy of maintaining a low inflation rate. Two issues complicated monetary policy in the late 1990s: The asian crisis: this presented a (confusing) combination of aggregate demand and aggregate supply shocks. Potential gdp = actual gdp, so the interest rate has to be 4%, investment must increase to 30m so money demand = 600, so money supply has to increase by 100. Increased money supply, i(cid:374)terest rate to 4%, i(cid:374)(cid:448)est(cid:373)e(cid:374)t = (cid:1005)(cid:1004), (cid:271)ut leads to a(cid:374) i(cid:374)(cid:272)rease of (cid:373)ore tha(cid:374) (cid:1005)(cid:1004), gdp = (cid:1006)(cid:1004), so the (cid:373)ultiplier is (cid:1006)
