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10 Cards in this Set
- Front
- Back
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Monetary Policy
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FED's control over teh money supply and resources
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Monetary Theory
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Money's effect on the economy
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If the interest rate is low then most money is what?
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cash
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if the interest rate is high then most money is what?
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assets
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If money increases then
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interest with decrease
investments will increase AD will increase GDP will increase |
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if money decreases then
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interest will increase
investments will decrease AD will decrease GDP will decrease |
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Money can be increased to close what?
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conractionary gap
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real wage
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wage in constant purchasing power dollars, stays on the SRAS, so if AD shifts along that line so will expectations
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an increase in teh government deficit reduces what?
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savings and creates higher interest rates (hence lower investments and lower GDP)
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Higher interest rates cause what?
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crowding out
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