Notes Apr28 - supply. LM 1 Lower interest rates cause...

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Monetary policy affects the economy by influencing the interest rate. But, in turn, changes in the interest rate also affect the exchange rate, which impacts the importing economy. i Qmoney Money Supply Money Supply
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IS0 LM 0 i y FE 0 Assume excessive unemployment initially increases money
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Unformatted text preview: supply. LM 1 Lower interest rates cause downward pressure on the value of the dollar. Dollar Depreciates-Exports Increase-Imports Decrease Monetary Policy is super effective in this case because the $ depreciating causes an increase in income. FE 1 IS1...
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This note was uploaded on 10/04/2011 for the course EC 340 taught by Professor Ballie during the Spring '10 term at Michigan State University.

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Notes Apr28 - supply. LM 1 Lower interest rates cause...

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