ECON 102 Lecture Notes - Lecture 19: Monetary Policy, Neutrality Of Money, Monetarism
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Review: expansionary monetary policy happens via open market operations. Last class, we developed the theory of monetary policy: Omos change bank reserves (the monetary base), which. Changes the amount of loans extended, which (the 2008 recession lasted so long because the banks did not issue loans) In practice, the equations for md, i(r), ad and as are not exactly known. The theory makes it sound like you can be very precise and big and bold: expand m by exactly. In fact, the fed make marginal changes, and typically they are slow. Steering a ship vs steering a bike - controlling the bike is much easier, but you must be more cautious (you need a lot more information and estimates to guide the ship) The economy works in the same way as in, you need to make a lot of estimates to slowly guide it towards growth/success.
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