Payments surplus causes money supply to expand a is2

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Unformatted text preview: olicy Y IS-LM-BP analysis: fixed exchange rates r LM1 b r2 r3 r1 LM2 BP c Restoration of full equilibrium a IS2 IS1 O Y1 Y2 Y3 An expansionary fiscal policy Y IS-LM-BP analysis: fixed exchange rates r BP LM1 r1 a IS2 IS1 O Y1 An expansionary fiscal policy: BP curve steeper than LM curve LM Y IS-LM-BP analysis: fixed exchange rates r BP LM1 b r2 r1 a IS2 IS1 O Y1 Y2 An expansionary fiscal policy: BP curve steeper than LM curve LM Y IS-LM-BP analysis: fixed exchange rates r BP LM1 b r2 r1 a Balance of payments deficit causes money supply to contract IS2 IS1 O Y1 Y2 An expansionary fiscal policy: BP curve steeper than LM curve LM Y IS-LM-BP analysis: fixed exchange rates r BP LM1 c r3 b r2 r1 LM2 Restoration of full equilibrium a IS2 IS1 O Y1 Y3 Y2 An expansionary fiscal policy: BP curve steeper than LM curve LM Y IS-LM-BP analysis: fixed exchange rates Effect of an expansionary Effect monetary policy under fixed exchange rates IS-LM-BP analysis: fixed exchange rates r LM1 BP r1 a IS O Y1 An expansionary monetary policy Y IS-LM-BP analysis: fixed exchange rates r LM1 LM2 BP r1 a b r2 IS O Y1 Y2 An expansionary monetary policy Y IS-LM-BP analysis: fixed exchange rates r LM1 LM2 BP r1 a b r2 Balance of payments deficit causes money supply to contract again IS O Y1 Y2 An expansionary monetary policy Y IS-LM-BP analysis: fixed exchange rates r LM1 LM2 BP r1 a b r2 Full equilibrium is restored back at point a IS O Y1 Y2 An expansionary monetary policy Y IS-LM-BP analysis: f...
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This document was uploaded on 05/18/2012.

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