Lecture 11242014 - 2:07 PM OUTLINE Output Aggregate Demand and Inflation The Fed Monetary Policy Review Question Unemployment depends on Answer

Lecture 11242014 - 2:07 PM OUTLINE Output Aggregate Demand...

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11/20/2014 2:07 PM 1 OUTLINE November 24, 2014 Output, Aggregate Demand, and Inflation The Fed & Monetary Policy Money and Reserves and Bank Lending Federal Funds Rate Yield Curve Zero Lower Bound Yes, there is class on Wednesday PS 4 due Wed/Thurs Dec 3/4 Essay part of final due via bCourses Thurs Dec 11 Review Question : Unemployment depends on? Answer : Ultimately, aggregate demand: AD = C + I + G + (EX IM) Aggregate Demand Unemployment Output (GDP) Employment Output & Inflation Policy Money, Reserves, Lending Interest Rates & Yield Curve What about inflation? Another Question : What determines the inflation rate? Answer : Output determines inflation (all else constant, we’ll learn why on Wednesday) Output (GDP) Employment Aggregate Demand Unemployment Inflation Output & Inflation Policy Money, Reserves, Lending Interest Rates & Yield Curve Who Fights Inflation . . . And How? Who : The Fed How : Primarily, by changing interest rates What : To fight inflation, the Fed creates unemployment Output (GDP) Employment Aggregate Demand Unemployment Inflation Interest Rates Output & Inflation Policy Money, Reserves, Lending Interest Rates & Yield Curve
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