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Unformatted text preview: o dollar depreciates o net exports increase o GDP increases • Tight Money Policy o decrease money supply o raise interest rate o reduce investment o reduce GDP o increase foreign demand for $US o dollar appreciates o net exports decrease o GDP decreases Monetarist Short and Long Run View of Monetary Transmission and Price Level MV = PQ Short Run • Expand MS --> AD shifts to the right • Decrease MS --> AD shifts to the left • Recession Adjustment: prices fall, full employment is restored Long Run • Prices Rise, full employment, GDP doesn't change...
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This note was uploaded on 02/21/2008 for the course ECON 4.3 taught by Professor Fox during the Spring '99 term at Pennsylvania State University, University Park.
- Spring '99