MGEA06H3 Chapter Notes - Chapter 6: Monetary Policy, Rein, Barter

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA06H3
• Professor: Iris Au

Document Summary

Distinguishing features of macro focuses on behavior of economy as a whole. Macroeconomics: the whole is greater than the sum of its parts. Paradox of thrift: when people are worried about the possibility of economics hard times and prepare by cutting their spending. Reduction in spending = business laying off workers (result = people may end up worse than if they hadn"t tried to cut spending) Flip side = spending more stimulates economy. Behaviour of macro is greater than sum of individual actions and market outcomes. Self-regulating economy: problems are resolved without gov intervention, through working of invisible hands. Keynesian economics: economics slumps are caused by inadequate spending and mitigated by gov intervention. Gov intervention can help depressed economy through monetary policy and fiscal policy. Monetary policy: uses quantity and/or growth rate of money to affect economic activity. Monetary policy influences inflation, interest, exchange rates, and other important short-run economic variables (bank of canada responsible)