Principles of Macroeconomics – Monetary Policy (Lecture 11.2)

Principles of Macroeconomics – Monetary Policy (Lecture 11.2)

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Principles of Macroeconomics – Monetary Policy (Lecture 11.2) The Reserve Bank of Australia conducts monetary policy, works to maintain a strong financial system and issues the nation’s currency. Short run: The quantity of money and real GDP are given and the IR adjusts achieve equilibrium. Long run: The supply and demand for loanable funds determines the IR, real GDP equals potential real GDP, and the price level adjusts to make the quantity of money supplied equal the quantity demanded. Results in a movement up the AD curve as well Eventually leads to higher wages, which creates a decrease in SAS and so on.
Background image of page 1

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

View Full DocumentRight Arrow Icon
As wages are going up too, the economy will go into an inflationary spiral. Shift in SRPC will occur rightwards back to the natural rate of unemployment, but higher price level.
Background image of page 2
Background image of page 3

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

View Full DocumentRight Arrow Icon
IE – Interest sensitive expenditure Monetary policy: Increase in money supply > decrease in IR More effect on interest rate for IE elastic, therefore more impact on investment. Increase in MS >
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

Principles of Macroeconomics – Monetary Policy (Lecture 11.2)

This preview shows document pages 1 - 5. Sign up to view the full document.

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