MONETFISCALPOL - 1 1 Monetary and Fiscal Policy- Short-Run...

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Unformatted text preview: 1 1 Monetary and Fiscal Policy- Short-Run Fiscal Policy G, T ->D->y,p Multipliers Lags Fed Structure, independence, goals, tools, reserves and money creation Balance Sheet Monetary Policy Fed-> Reserves/Ms->r->I,C,NX,D->y,p Cant push on a string -Liquidity Trap Crisis Policies Fiscal policy / fed policy, fomc 2 How much of this weeks material do you feel you understand before we begin, based on reading and HW? A. <60% B. 61-70% C.71-80% D.81-90% E. 91-100% 3 About the explanations for HW 6 that were posted A They were very helpful B Better than going over them in class C Both D Neither E I havent looked at them 2 4 What Would Keynes Have Done? 11/08 Keynes diagnosis of recessions and depressions remains the foundation of modern macroeconomics 1. Cause? A. inflation b. government deficits c. decline in demand d. monetary policy 2. Cure? A. reduce deficits b. reduce money supply c. increase G d. increase I Keynes Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slave of some defunct economist. 5 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 6 In the News? 3 7 Course Issues Clicker update Tonight How to get it, and keep it Work, ask, answer, think DONT listen, read Midterm Online, Next Weds, 40 questions, 40 minutes (ET) Special issues see me 8 How Does Fiscal Policy Work (in the Short Run)? A. G D y, P B. Ms G D y C. G Ms D P,y D. G T D P,y 9 Fiscal Policy Demand Management Short-run Keynesian Shift demand Stabilization, counter-cyclical Fiscal Policy change G, T for stabilization purposes G D P,y (recession, mostly y) T (Y-T) C D P,y Multiplier effect Partial crowding out, maybe G i I or crowding in 4 10 More Fiscal Policy SR Fiscal Policy Agg D Why too little private demand C,I G,T->D->Y, P (mostly y in recession) Congress, President Multipliers Y/ G=1/(1-mpc) impact of policy Y/ T=-mpc/(1-mpc) Balanced Budget Y/( G=- T)=1 Discretionary versus automatic stabilizers Full employment or structural deficits SR deficits Lags-recognition, implementation, impact Long Run Issues Partial crowding out, maybe G i I or crowding in deficits 11 Role of Fiscal Policy 2002 Walsh Recession 2001 Use is unusual why?...
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MONETFISCALPOL - 1 1 Monetary and Fiscal Policy- Short-Run...

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