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........
real interest rate increases
AD decreases
UE increases
Interest sensitive spending (C+I) decreases
PL decreases and Real Output decreases
G is therefore borrowing more
Dlf increases since the government needs loans OR Slf decreases since the banks are lending to the government
G inc and T dec
Central Bank Expansionary Monetary Policy
Central Bank-->MM-->Loanable Funds Market-->AD-->Phillips.....
PL increases and Real Output increases
Nominal interest rates decrease and Qm increases
Real interest rates decrease and Qlf increase
Central Bank Buys Bonds
Slf increases
AD increases
UE decreases
Interest sensitive spending (C+I) 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
PL decreases and RGDP decreases
$ appreciates
UE increases
Ms decreases
Central Bank Sells Bonds
S$ decreases OR D$ increases
Slf decreases
Real interest rates increase and Qlf decrease
Foreign G/S are relatively less expensive AND Domestic G/S are relatively more Expensive
Nominal interest rates increase and Qm decreases
AD decreases
US EX decreases and IM increase
Foreign Economy has an Inflationary Gap
Foreign Economy-->Forex-->Trade-->AD-->Phillips.....
S$ decreases and D$ increases
Foreign Economy has high PL and high DI
US Nx decreases causing a Current Account deficit
$ can buy more foreign currency and foreign currency can buy less $
UE increases
$ appreciates
US EX decreases and IM increases
US AD decreases
US G/S Relatively Less expensive and foreign G/S are relatively more expensive
PL decreases and RGDP decreases