Log in
Sign up for FREE
arrow_back
Library
Resequence Fiscal and Monetary Policy-FOREX
By Michael Burbine
star
star
star
star
star
Share
share
Last updated about 1 year ago
4 questions
Add this activity
1
1
1
1
Question 1
1.
Question 2
2.
Question 3
3.
Question 4
4.
Government enacts expansionary fiscal policy......
Gov-->Loanable Funds Market-->AD-->Phillips........
G inc and T dec
Dlf increases since the government needs loans OR Slf decreases since the banks are lending to the government
AD decreases
Interest sensitive spending (C+I) decreases
real interest rate increases
G is therefore borrowing more
UE increases
PL decreases and Real Output decreases
Central Bank Expansionary Monetary Policy
Central Bank-->MM-->Loanable Funds Market-->AD-->Phillips.....
Real interest rates decrease and Qlf increase
Nominal interest rates decrease and Qm increases
Slf increases
Interest sensitive spending (C+I) increases
AD increases
UE decreases
Central Bank Buys Bonds
PL increases and Real Output increases
Ms increases
Central Bank Contractionary Monetary Policy
Central Bank-->MM->Loanable Funds Market-->Investment-->Forex-->AD-->Phillips.....
NX decreases causing a current account deficit
US EX decreases and IM increase
Ms decreases
Real interest rates increase and Qlf decrease
Foreign G/S are relatively less expensive AND Domestic G/S are relatively more Expensive
Central Bank Sells Bonds
S$ decreases OR D$ increases
$ appreciates
Slf decreases
PL decreases and RGDP decreases
AD decreases
Nominal interest rates increase and Qm decreases
UE increases
Foreign Economy has an Inflationary Gap
Foreign Economy-->Forex-->Trade-->AD-->Phillips.....
$ appreciates
PL decreases and RGDP decreases
S$ decreases and D$ increases
UE increases
US EX decreases and IM increases
US Nx decreases causing a Current Account deficit
US G/S Relatively Less expensive and foreign G/S are relatively more expensive
Foreign Economy has high PL and high DI
US AD decreases
$ can buy more foreign currency and foreign currency can buy less $