ECON 200 Lecture Notes - Lecture 14: Monetarism, Monetary Policy, Fiscal Policy
Document Summary
Interest up: demand for credit up, nx us, consumer durables up. Monetary policy can not: control lr output (lras, control unemployment in the lr, control nominal interest rates in the lr. Monetary policy (the fed) can: provide temporary liquidity. In 2008 provided to all banks: stabilize prices, minimize instability of ad through a monetary rule. Summary of monetary policy: emphasis on ad, monetarist/ monetary policy, ad is stable. Investment is more stable: people look to future, fiscal policy can destabilize the economy, cautious about fiscal policy, highlights price expectations. The new classical approach: extension of monetarism, robert lucas (u of chicago) leads the revolution. Where do business cycles come from: unanticipated changes in ad and monetary policy, e(cid:454): fed i(cid:374)creases (cid:373)o(cid:374)e(cid:455) suppl(cid:455) w/out sa(cid:455)i(cid:374)g a(cid:374)(cid:455)thi(cid:374)g & people do(cid:374)"t k(cid:374)ow, people spend money, firms increase supply and labor. Is increase in demand because of preference change or increase in.
