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MONETFISCALPOLCLASS

MONETFISCALPOLCLASS - Short-Run Monetary and Fiscal Policy...

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1 1 Short-Run Monetary and Fiscal Policy What is Fiscal Policy? Monetary Policy? How do they each work? Lags pro-cyclical policy How effective are each? Algebra of Keynesian SR Model Multiplier, liquidity trap, discretionary policy, automatic stabilizers, and more 2 Fiscal Policy Demand Management Short-run Keynesian Shift demand Stabilization, counter-cyclical Fiscal Policy change G, T for stabilization purposes G ↑→ D ↑→ P,y T ↓→ Y-T ↑→ C ↑→ D ↑→ P,y Multiplier effect Partial crowding out G ↑→ i ↑→ I 3 Monetary Policy Fed Change in Ms -> changes agg D Ms ↑→ i ↓→ I ↑→ D ↑→ P,y Other channels Credit availability Exchange rates Demand shifts
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2 4 Referring to monetary policy and fiscal policy, … A. both shift aggregate supply B. both shift aggregate demand C. monetary policy shifts demand and fiscal shifts supply D. fiscal policy shifts demand and monetary shifts supply None of the above 5 In the News? 6 Course Issues Discussion board and clicker prizes Quiz 3 Thursday – classes 4,5 Clicker update Extra Credit How to get it, and keep it Work, ask, answer, think – DON’T listen, read
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