11Short-Run Monetary and Fiscal PolicyWhat is Fiscal Policy? Monetary Policy?How do they each work? Lags–pro-cyclical policyHow effective are each? Algebra of Keynesian SR ModelMultiplier, liquidity trap, discretionary policy, automatic stabilizers, and more2Fiscal PolicyDemand ManagementShort-run KeynesianShift demandStabilization, counter-cyclicalFiscal Policychange G, T for stabilization purposesG ↑→D ↑→P,y↑T ↓→Y-T ↑→C ↑→D ↑→P,y↑Multiplier effectPartial crowding out G ↑→i ↑→I↓3Monetary PolicyFed Change in Ms -> changes agg DMs ↑→i ↓→I ↑→D ↑→P,y↑Other channelsCredit availabilityExchange ratesDemand shifts
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24Referring to monetary policy and fiscal policy, …A. both shift aggregate supplyB. both shift aggregate demandC. monetary policy shifts demand and fiscal shifts supplyD. fiscal policy shifts demand and monetary shifts supplyNone of the above5In the News?6Course IssuesDiscussion board and clicker prizesQuiz 3 Thursday –classes 4,5Clicker update Extra Credit How to get it, and keep itWork, ask, answer, think – DON’T listen, read