Introduction - 13:03 Introduction o ,investment,economic...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
13:03 Introduction Earlier chapters covered: o The long run effects of fiscal policy on interest rates, investment, economic  growth o The long run-effects of monetary policy on the price level and inflation rate This chapter focuses on the short-run effects of fiscal and monetary policy,  which work through aggregate demand. o Aggregate Demand Curve o -recall the AD curve slopes downward for three reasons: the wealth effect the interest rate effect (most important) lower price level leads to lower  interest rates the exchange-rate effect Theory of Liquidity Preference o A simple theory of the interest rate (denoted r) o R adjusts to balance supply and demand o Money supply: assume fixed by central bank, does not depend on the  interest rate o Regardless of what the interest rate, central bank will set the money  supply o
Image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
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