Monetary Policy
(Recession)
|
International Trade
|
Fed will:
1. Buy bonds
2. Lower
RR
3. Lower
DR
4. Lower
FF
all contribute to:
MS ↑, i ↓, Ig ↑, AD ↑,
GDP ↑
**opposite occurs during inflationary prd
|
D $ (demand for $) ↓
↓
$ depreciated (value of $ goes ↓)
↓
Exports ↑ (cheaper)
↓
Xn ↑
↓
AD ↑
↓
GDP ↑
|
Fiscal Policy
(Recession)
|
International Trade
|
-congress will cut taxes or ↑ govt spending
-consumption and govt spending will ↑
-AD will ↑
-GDP ↑
-Deficit→supply of LF ↓ (none to loan out)
↓
I (interest) ↑
Ig ↓
|
D $ ↑
↓
$ appreciate (increase in value)
↓
Exports ↓
↓
Net exports ↓
↓
AD ↓
↓
GDP ↓
|
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