11-02-08-Two Types of Monetary Policy-Topic 6

11-02-08-Two Types of Monetary Policy-Topic 6 - Y Y K...

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Topic 6: Two Different Ways of Enacting Expansionary Monetary Policy • An Increase (10%) in M T , Which Causes A Very Roughly 10% Rightward Shift in LM • A 1% Decrease in r T , Which Causes A Downward Shift in LM of a Fraction of 1% The Fraction Is Larger As l Is Smaller (And Equals 1 When l Is Zero).
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K r r T Figure 1: We Are Picturing the LM Curve Subjected To Two Different Kinds of Shift: Rightward, and Downward
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Unformatted text preview: Y Y K Figure 2: Separately, A Rightward Shift r r T Y Y K Figure 3: And a Downward Shift r r T Y Y r r T Y Y Figure 4: If LM Is Vertical, Very Different Effects From Rightward Versus Downward Shifts r r T Y Y Figure 5: If LM Is Horizontal, Very Different Effects From Rightward Versus Downward Shifts...
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This note was uploaded on 07/16/2011 for the course ECON 2154 taught by Professor Boyer during the Winter '10 term at UWO.

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11-02-08-Two Types of Monetary Policy-Topic 6 - Y Y K...

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