Flashcards
Monetary and Fiscal Policy
Flashcards do conjunto (14)
- 1Theory of Liquidity Preferenceinterest rate adjusts to supply and demand for money
supply fixed by BOC - 2Money Demandif GDP rises households want more goods and services, need more money, increase in demand
- 3Equilibrium in the Money MarketMS curve is vertical, changes in R do not impact MS, fixed by BOC
MD is downward sloping, a fall in R increases money demand - 4Downward Slope of AD Curvehigher price level increases quantity of money demanded, higher interest rate, quantity of goods and services demanded falls
- 5Increase in the Price Levelreal exchange rate rises
canadian goods more expensive, substitute away from Canadian goods, exports fall
negative relationship between price level and quantity of goods and services demanded - 6Contracting the Money Supplyinterest rate rises, reduces quantity of goods and services demanded, lowering aggregate demand
- 7Expansion in Money Supplyinterest rate falls, increases quantity of goods and services demanded, increasing aggregate demand
dollar depreciates in value, exports rise, increased demand - 8Expansionary Fiscal PolicyIncrease in government spending or decrease in taxes
shifts AD right - 9Contractionary Fiscal Policydecrease in government spending or increase in taxes
- 10The Multiplier Effectgovernment spending increases wages, consumption increases, aggregate demand further increased
- 11The Crowding Out EffectFiscal expansion shifts AD to the right but raises r, reducing investment, AD shift may be smaller
- 12Fiscal Expansion in an Open Economy: Flexible Exchange Rateinterest rate above world rate, domestic assets purchased, increasing exchange rate, crowds out net exports, money demand falls, interest rate returns to world interest rate
- 13Fiscal Expansion in an Open Economy: Fixed Exchange Rateinterest rate above world rate, prevent change in exchange rate by expanding money supply, returns interest rate to world rate
- 14Stabilization Policyunexpected expansions and contractions can cause unemployment and inflation, can be used to offset
but affect economy with long lag, economy will eventually sort itself out
Informações
- Descrição
- 1000 Intro to Economics (Monetary and Fiscal Policy) FlashCards sobre Monetary and Fiscal Policy , criado por Megan Clermont em 15-04-2016.
- Criado por
- Megan Clermont
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- Avaliação