PPT-16 The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Influence of Monetary and Fiscal Policy on Aggregate Demand Monetary policy refers to the control of a countrys quantity of money by its central bank We saw the longrun effects of monetary policy in Chapter 12 Money Growth and Inflation. 29. McGraw-Hill/Irwin. Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.. Aggregate Demand. Real GDP desired at each price level. Inverse relationship. Real balances effect. Policy. Chapter 31. Orientation/Objectives. Orientation. Objectives. Domestic. Price, Output Stability. External. Forex. Rate Stability. Source . Link. . Hong Kong’s Exchange Rate Regime. Convertibility Undertaking. Taggert J. Brooks. Module 20. Economic Policy and the Aggregate Demand-Aggregate Supply Model. Macroeconomic Policy. Economy is self-correcting in the long run.. Stabilization policy . is the use of government policy to reduce the severity of recessions and rein in excessively strong expansions.. Changes in federal taxes and purchases . Where does the government spend its money?. Federal Government . Spending, 2010. Fiscal Policy. An Overview of Government Spending and Taxes. The Federal Government’s Share of Total Government Expenditures, . Policy. Economics. Monetary Policy. Monetary Policy. The expansion or contraction of the money supply in order to influence the cost and the availability of credit. Federal Reserve. Privately owned, publicly run, central bank of the United States of America. Chapter . 15 . of . Macroeconomics. , . 8. th. . edition, by N. Gregory . Mankiw. ECO62. . Udayan. . Roy. PART V Topics in Macroeconomic Theory. Inflation and dynamics in the short run. So far, to analyze the short run we have used. Chapter 11. Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.. Chapter 11: Learning Objectives. Stabilization Policies and Their Effects. E. 2. Expansionary Fiscal Policy: Addressing Recessionary Gaps. Suppose a . negative demand shock . has caused a recession. . AD. 2. AD. 1. Aggregate . Price Level. Derive AS/AD model . Understand cause & consequences of change in AS/AD. Short run vs Long run. Effects on economic growth, prices, unemployment.. Different schools of thought in macroeconomics. Macroeconomic Long Run and Short Run. Day 1. Q1: During the Great Depression we saw a rise in unemployment and deflation. In the recession of 1979-1982 a rise in unemployment but inflation. Why?. Q2: What is stagflation?. Aggregate Supply and Aggregate Demand. John Maynard Keynes & Milton Friedman. Module 35 Essential Questions. Why . was classical . macroeconomics . inadequate . for the problems posed by the Great . Depression?. How . did Keynes . and the experience of the Great Depression . Chapter 13. © Dünhaupt, Dullien, Goodwin, Harris, Nelson, Roach, . Torras. Learning goals. After . today‘s. . lecture. , . you. . will . be. . able. . to. :. Explain . the derivation of the Aggregate Demand curve relating inflation and output levels, and how it shifts.. Introduction & Determinants. Aggregate Demand Curve . (Inverse) Relationship between price level & quantity of aggregate output demanded for the economy as a whole. Aggregate Price Level (measured with GDP deflator). AD - The Model. PL. RGDP. AD. PL = Price Level. ALL prices in the economy. Real Gross Domestic Product = Dollar value of ALL domestically produced final goods and services adjusted for inflation. AD = Aggregate demand. The total amount of goods and services people will purchase at ALL price levels. Has the same components as GDP..