Principles of Macroeconomics – Monetary Policy (Lecture 11.1)

Principles of Macroeconomics – Monetary Policy (Lecture 11.1)

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

View Full Document Right Arrow Icon
Principles of Macroeconomics – Monetary Policy (Lecture 11.1) Purposes Stability of the Australian currency to maintain inflation rates Maintenance of full employment Prosperity and welfare of the people of Australia. Growth in potential GDP. o Done by minimising inflation and fluctuations, resulting in greater confidence by firms, therefore more investments. mv = pv In Zimbabwe: o Increased the supply of money by printing more (Borrowed money from itself > Government had borrowed the money it had printed, thus increasing the money supply) o M + v = PY (Long-run) M can have an impact on real GDP. Y is effected by T, N, I, K. As prices were going up, the value of the money was going downwards. V increased as no one wanted to hold the money for any longer due to the deprivation in value. Use of neo-classical Theory. Short-run strategies Policy Strategy o Instrument rule Taylor rule- target the cash rate itself, therefore the cash rate is the target. Also able to target the inflation rate. 2 – 3 % over the life of a cycle.
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Principles of Macroeconomics – Monetary Policy (Lecture 11.1)

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online