10 ~ Monetary Policy

Pregunta	Respuesta
What is MP?	manipulating the money supply in order to achieve economic objectives (NOT JUST IR)
MP diagram for expansionary MP	↓ir = ↑C, ↑I = PME = ↑AD ↓ir = ↑I = ↑SRAS ↓ir = ↑I = ↑LRAS ↓ir = ↓reward of saving, ↓cost of borrowing = ↑C,↑I = ↑AD = ↑GDP ↑QE/AP = ↑MS = ↑C,↑I = ↑AD = ↑GDP
What is bad about MP? (4)	time lags (18 moths to 2 years) magnitude (size of change has relative effect) not ceteris paribus ↓ir may not get passed on to consumers
What is QE/AP?	↑MS to stimulate AD
How does QE/AP work?	bank creates money to buy bonds from firms (if they buy lots then ↑D = ↑P so there will be less interest) this reduces ir (↓reward of saving and cost of borrowing) leading businesses and people to borrow more so they spend more and create jobs to boost the economy

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	Creado por Tara Pugal hace más de 8 años