POSC 182 Lecture 20 2010

POSC 182 Lecture 20 2010 - POSC 182 Politics and Economic...

Info icon This preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
POSC 182: Politics and Economic Policy Unit 3: Policy Tools and Divergent Economic Philosophies Lecture 20: Macroeconomic Policy February 22, 2010
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Monetary Policy Monetary policy is generally a quicker option than fiscal policy in affecting the economy Fiscal policy requires spending bills or tax cuts—regular budgets are made on an annual basis Monetary policy entails expanding/contracting money supply In the short-run, increases in money supply can stimulate economic activity as people have more money to spend. In the long-run, it can lead to inflation Money supply is affected by: Reserve requirements : how much money banks must keep on hand rather than lend out. Lowering the reserve requirement increases the money supply since banks can lend out more money. Open market operations : the buying and selling of government securities (e.g. Treasury bills). Selling securities to banks, decreases the money in the economy. Interest rates : lower interest rates increase money supply since loans are cheaper
Image of page 2
Monetary Policy Main goals of central banks: 1) full employment, 2) low inflation, 3) financial regulation, 4) financial stability Recall that there is often a trade-off between employment and inflation (Phillips Curve). Thus, finding the right balance between employment and inflation can be difficult.
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern