ECON 2002.01 Study Guide - Midterm Guide: Automatic Stabilizer, Foreign Exchange Market, Aggregate Supply

364 views3 pages
Published on 8 Dec 2016
Department
Professor
Study Guide for Macro M3 AU16
Monetary Policy
Goals of monetary policy and Fed
The goals of monetary policy should include the maintenance of full employment, the avoidance of inflation or
deflation, and the promotion of economic growth.
The Fed’s primary goal appears to be the control of inflation. Providing that inflation is under control,
the Fed will act to close recessionary gaps.
(The fed will act to close recessionary or inflationary gaps, that it will seek to spur economic growth, or that it
will strive to keep the price level steady)
Monetary policy
Expansionary policy, such as a purchase of government securities by the Fed, tends to push bond prices
up and interest rates down, increasing investment and aggregate demand.
Contractionary policy, such as a sale of government securities by the Fed, pushes bond prices down,
interest rates up, investment down, and aggregate demand shifts to the left.
Targets
Possible targets include interest rates, money growth rates, and the price level or expected changes in
the price level.
Money supply and demand model
Supply and demand shifters in money market
Money market equilibrium
Interest rate effect on aggregate demand
Transmission mechanism for monetary policy
Expansionary monetary policy
Contractionary monetary policy
Fed policies during meltdown
Problems:
Assessing economic situation and
Applying appropriate monetary policy
Using static model
Money supply/demand analysis
Fiscal Policy
Fiscal policy
Automatic stabilizer
Discretionary spending
Nondiscretionary spending
Entitlements
Expansionary fiscal policy
Contractionary fiscal policy
Lags
Multiplier effect
Fiscal policy effects on aggregate supply
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows page 1 of the document.
Unlock all 3 pages and 3 million more documents.

Already have an account? Log in

Document Summary

The goals of monetary policy should include the maintenance of full employment, the avoidance of inflation or deflation, and the promotion of economic growth. The fed s primary goal appears to be the control of inflation. Expansionary policy, such as a purchase of government securities by the fed, tends to push bond prices up and interest rates down, increasing investment and aggregate demand. Contractionary policy, such as a sale of government securities by the fed, pushes bond prices down, interest rates up, investment down, and aggregate demand shifts to the left. Possible targets include interest rates, money growth rates, and the price level or expected changes in the price level. Short run phillips curve vs. long run phillips curve. Shifters of long run and short run phillips curves. Analyzing and drawing phillips curves for short and long run. Monetary and fiscal policy in an open economy.

Get OneClass Grade+

Unlimited access to all notes and study guides.

YearlyMost Popular
75% OFF
$9.98/m
Monthly
$39.98/m
Single doc
$39.98

or

You will be charged $119.76 upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.