the unemployment rate and to create a stable inflation rate. After thorough consultation with colleges it is my opinion that the appropriate response during this economic downturn is to take an expansionary fiscal policy approach‚ and to encourage the FED to consider appropriate expansionary monetary measures as well. Though there have been suggestions to increase interest rates and lower government spending‚ such actions would further stagnate any economic growth. It is the lack of public spending
Free Monetary policy Inflation Recession
Economics Exam Notes Question 1. (Chapter 31‚ pg759) * Impact of interest rate on spending * Analysis of events which change interest rate in the market * Policies to manage inflation/recession Impact of interest rate on the economy (ripple effect) To lower interest rate | | To increase interest rate | | | | | | Central bank buy securities in open market operations and increases money supply | | Central bank sell securities in open market operations and increases
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Introduction Key points: The Federal Reserve‚ U.S. central bank had make their decision to continue on with buying treasury and mortgage bonds with the new money through the policy of quantitative easing. They chose not to taper because the unemployment rate has reduced. Moreover‚ according to the federal census‚ the real household incomes in America did not fall any further. Hence‚ quantitative easing has been quite good for increasing employment and boosting the household wealth in US (The Economist
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relationship and weak relation in short run. Fragile combination of fiscal and monetary policy‚ finding supports Jcurve theory and expenditures switching affect theory. Keywords: Money supply‚ Current Account‚ Co-integration JEL Classification: C5‚ E5‚ F4 1. Introduction Economic management‚ stabilization and adjustment of any developing country are totally concern with the main instruments of an economy‚ monetary policy and foreign exchange rate. In most of developing economies real exchange rate
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government conducts expansionary fiscal policy and the aggregate supply (AS) curve has a flat slope‚ what is the result? Close an inflationary gap: Contractionary Fiscal Policy: 3 options: G‚ transfer payments (C)‚ taxes (C) Which option is preferred if one wanted a smaller govt.? larger govt.? Show both graphically with the AD-AS Graph (Shifts the AD line) What kind of gap do we have now? Is the U.S. Federal Govt. conducting appropriate short-run fiscal stabilization policy? Automatic Stabilizers
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fiscal policy and monetary policy‚ but if the economy is in a recession‚ no matter how low interest rates are‚ people cannot be forced to borrow if they do not have confidence in the economy. Therefore the main way that government uses to close the recessionary gap should be fiscal policy. Explain 1: When the real GDP (Y1) less than the potential GDP (Yp)‚ a recessionary gap will exist‚ shown as the range of G in the diagram 1. Then the government will pursues the expansionary fiscal policy‚ such
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1. I disagree with the statement “Inflation doesn’t benefit anyone in the economy” because inflation primarily determines the price stability in the country‚ and states that there is an ongoing economic activity. This economic activity can be determined through investments running in the country. Inflation will benefit citizens as long as it is between the targeted inflation rate of that certain country. An example would be the recent inflation rate in the Philippines wherein it was leaning towards
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Economic policy Economic policy refers to the actions that governments take in the economic field. It covers the systems for setting interest rates and government budget as well as the labor market‚ national ownership‚ and many other areas of government interventions into the economy. Such policies are often influenced by international institutions like the International Monetary Fund or World Bank as well as political beliefs and the consequent policies of parties. Types of economic policy Almost
Free Monetary policy Inflation Keynesian economics
1) Which of the following would be a useful way to increase the saving rate? A) Tax breaks to increase the real return that savers receive B) Increasing taxes if Ricardian equivalence holds C) Increasing government spending D) Increasing taxes on capital goods Answer: A 2) Assume that the full-employment level of output is $5000 billion and the natural unemployment rate is 5%. Suppose the current unemployment rate is 8%. What would be the current level of output according to Okun’s law (when
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system was implemented as a means of monetary management among independent nation states. It was based on Keynesian economics and a shared belief in capitalism. Bretton Woods‚ BWS‚ was considered a necessary response to the anarchic protectionist and neomerchantilist policies favoured in the great depression of the 30s. It was used to stop nation states using currency devaluations to increase competitiveness. Due to a lack of scale and coordination‚ these policies stagnated foreign direct investment
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