Chapter 21 The Influence of Monetary and Fiscal Policy on Aggregate Demand
曼昆经济学原理英文版习题答案35章THE SHORT-RUN TRADE-OFF BETWEEN INFLATION AND UNEMPLOYMENT
WHAT’S NEW IN THE SEVENTH EDITION:The section on ”A Financial Crisis Takes Us for a Ride Along t he Phillips Curve” has been updated.LEARNING OBJECTIVES:By the end of this chapter, students should understand:why policymakers face a short-run trade-off between inflation and unemployment.why the inflation-unemployment trade-off disappears in the long run.how supply shocks can shift the inflation-unemployment trade-off.the short-run cost of reducing inflation.how policymakers’ credibility might affect the cost of reducing inflation.CONTEXT AND PURPOSE:Chapter 22 is the final chapter in a three-chapter sequence on the economy’s short-run fluctuations around its long-term trend. Chapter 20 introduced aggregate supply and aggregate demand. Chapter 21 developed how monetary and fiscal policies affect aggregate demand. Both Chapters 20 and 21 addressed the relationship between the price level and output. Chapter 22 will concentrate on a similar relationship between inflation and unemployment.The purpose of Chapter 22 is to trace the history of economists’ thinking about the relationship between inflation and unemployment. Students will see why there is a temporary trade-off between inflation and unemployment, and why there is no permanent trade-off. This result is an extension of the results produced by the model of aggregate supply and aggregate demand where a change in the price level induced by a change in aggregate demand temporarily alters output but has no permanent impact on output.389390❖Chapter 22/The Short-Run Trade-off between Inflation and UnemploymentKEY POINTS:∙ The Phillips curve describes a negative relationship between inflation and unemployment. By expanding aggregate demand, policymakers can choose a point on the Phillips curve with higher inflation and lower unemployment. By contracting aggregate demand, policymakers can choose apoint on the Phillips curve with lower inflation and higher unemployment.∙ The trade-off between inflation and unemployment described by the Phillips curve holds only in the short run. In the long run, expected inflation adjusts to changes in actual inflation, and the short-run Phillips curve shifts. As a result, the long-run Phillips curve is vertical at the natural rate ofunemployment.∙ The short-run Phillips curve also shifts because of shocks to aggregate supply. An adverse supply shock, such as an increase in world oil prices, gives policymakers a less favorable trade-off between inflation and unemployment. That is, after an adverse supply shock, policymakers have to accept a higher rate of inflation for any given rate of unemployment, or a higher rate of unemployment for any given rate of inflation.∙ When the Fed contracts growth in the money supply to reduce inflation, it moves the economy along the short-run Phillips curve, which results in temporarily high unemployment. The cost of disinflation depends on how quickly expectations of inflation fall. Some economists argue that a crediblecommitment to low inflation can reduce the cost of disinflation by inducing a quick adjustment of expectations.CHAPTER OUTLINE:I. The Phillips CurveA. Origins of the Phillips Curve1. In 1958, economist A. W. Phillips published an article discussing the negative correlationbetween inflation rates and unemployment rates in the United Kingdom.2. American economists Paul Samuelson and Robert Solow showed a similar relationshipbetween inflation and unemployment for the United States two years later.3. The belief was that low unemployment is related to high aggregate demand, and highaggregate demand puts upward pressure on prices. Likewise, high unemployment is relatedto low aggregate demand, and low aggregate demand pulls price levels down.4. Definition of Phillips curve: a curve that shows the short-run trade-off betweeninflation and unemployment.Chapter 22/The Short-Run Trade-off between Inflation and Unemployment❖ 3915. Samuelson and Solow believed that the Phillips curve offered policymakers a menu ofpossible economic outcomes. Policymakers could use monetary and fiscal policy to chooseany point on the curve.B. Aggregate Demand, Aggregate Supply, and the Phillips Curve1. The Phillips curve shows the combinations of inflation and unemployment that arise in theshort run as shifts in the aggregate-demand curve move the economy along the short-runaggregate-supply curve.2. The greater the aggregate demand for goods and services, the greater the economy’s outputand the higher the price level. Greater output means lower unemployment. The higher theprice level in the current year, the higher the rate of inflation.3. Example: The price level is 100 (measured by the Consumer Price Index) in the year 2020.There are two possible changes in the economy for the year 2021: a low level of aggregatedemand or a high level of aggregate demand.a. If the economy experiences a low level of aggregate demand, we would be at a short-run equilibrium like point A. This point also corresponds with point A on the Phillips curve.Note that when aggregate demand is low, the inflation rate is relatively low and theunemployment rate is relatively high.b. If the economy experiences a high level of aggregate demand, we would be at a short-run equilibrium like point B. This point also corresponds with point B on the Phillips curve.Note that when aggregate demand is high, the inflation rate is relatively high and theunemployment rate is relatively low.392❖Chapter 22/The Short-Run Trade-off between Inflation and Unemployment Figure 24. Because monetary and fiscal policies both shift the aggregate-demand curve, these policiescan move the economy along the Phillips curve.a. Increases in the money supply, increases in government spending, or decreases in taxesall increase aggregate demand and move the economy to a point on the Phillips curvewith lower unemployment and higher inflation.b. Decreases in the money supply, decreases in government spending, or increases in taxesall lower aggregate demand and move the economy to a point on the Phillips curve withhigher unemployment and lower inflation.II. Shifts in the Phillips Curve: The Role of ExpectationsA. The Long-Run Phillips Curve1. In 1968, economist Milton Friedman argued that monetary policy is only able to choose acombination of unemployment and inflation for a short period of time. At the same time,economist Edmund Phelps wrote a paper suggesting the same thing.2. In the long run, monetary growth has no real effects. This implies that it cannot affect thefactors that determine the economy’s long-run unemployment rate.Chapter 22/The Short-Run Trade-off between Inflation and Unemployment ❖ 3933. Thus, in the long run, we would not expect there to be a relationship between unemployment and inflation. This must mean that, in the long run, the Phillips curve is vertical.4. The vertical Phillips curve occurs because, in the long run, the aggregate supply curve is vertical as well. Thus, increases in aggregate demand lead only to changes in the price leveland have no effect on the economy’s level of output. Thus, in the long run, unemployment will not change when aggregate demand changes, but inflation will.5. The long-run aggregate-supply curve occurs at the economy’s natural level of output. Thismeans that the long-run Phillips curve occurs at the natural rate of unemployment.394❖Chapter 22/The Short-Run Trade-off between Inflation and UnemploymentB. The Meaning of “Natural”1. Friedman and Phelps considered the natural rate of unemployment to be the rate towardwhich the economy gravitates in the long run.2. The natural rate of unemployment may not be the socially desirable rate of unemployment.3. The natural rate of unemployment may change over time.C. Reconciling Theory and Evidence1. The conclusion of Friedman and Phelps that there is no long-run trade-off between inflationand unemployment was based on theory, while the correlation between inflation andunemployment found by Phillips, Samuelson, and Solow was based on actual evidence.2. Friedman and Phelps believed that an inverse relationship between inflation andunemployment exists in the short run.3. The long-run aggregate-supply curve is vertical, indicating that the price level does notinfluence output in the long run.4. But, the short-run aggregate-supply curve is upward sloping because of misperceptionsabout relative prices, sticky wages, and sticky prices. These perceptions, wages, and pricesadjust over time, so that the positive relationship between the price level and the quantity ofgoods and services supplied occurs only in the short run.5. This same logic applies to the Phillips curve. The trade-off between inflation andunemployment holds only in the short run.6. The expected level of inflation is an important factor in understanding the difference betweenthe long-run and the short-run Phillips curves. Expected inflation measures how much peopleexpect the overall price level to change.7. The expected rate of inflation is one variable that determines the position of the short-runaggregate-supply curve. This is true because the expected price level affects the perceptionsof relative prices that people form and the wages and prices that they set.8. In the short run, expectations are somewhat fixed. Thus, when the Fed increases the moneysupply, aggregate demand increases along the upward sloping short-run aggregate-supplycurve. Output grows (unemployment falls) and the price level rises (inflation increases).9. Eventually, however, people will respond by changing their expectations of the price level.Specifically, they will begin expecting a higher rate of inflation.Chapter 22/The Short-Run Trade-off between Inflation and Unemployment ❖ 395D. The Short-Run Phillips Curve1. We can relate the actual unemployment rate to the natural rate of unemployment, the actual inflation rate, and the expected inflation rate using the following equation:a. Because expected inflation is already given in the short run, higher actual inflation leadsto lower unemployment.b. How much unemployment changes in response to a change in inflation is determined by the variable a, which is related to the slope of the short-run aggregate-supply curve.2. If policymakers want to take advantage of the short-run trade-off between unemployment and inflation, it may lead to negative consequences.a. Suppose the economy is at point A and policymakers wish to lower the unemploymentrate. Expansionary monetary policy or fiscal policy is used to shift aggregate demand tothe right. The economy moves to point B, with a lower unemployment rate and a higherrate of inflation.b. Over time, people get used to this new level of inflation and raise their expectations ofinflation. This leads to an upward shift of the short-run Phillips curve. The economy ends up at point C, with a higher inflation rate than at point A, but the same level ofunemployment.396 ❖ Chapter 22/The Short-Run Trade-off between Inflation and UnemploymentE. The Natural Experiment for the Natural-Rate Hypothesis1. Definition of the natural-rate hypothesis: the claim that unemployment eventually returns to its normal, or natural rate, regardless of the rate of inflation .2. Figure 6 shows the unemployment and inflation rates from 1961 to 1968. It is easy to see the inverse relationship between these two variables.3. Beginning in the late 1960s, the government followed policies that increased aggregate demand.a. Government spending rose because of the Vietnam War.b. The Fed increased the money supply to try to keep interest rates down.4. As a result of these policies, the inflation rate remained fairly high. However, even thoughinflation remained high, unemployment did not remain low.a. Figure 7 shows the unemployment and inflation rates from 1961 to 1973. The simple inverse relationship between these two variables began to disappear around 1970.b. Inflation expectations adjusted to the higher rate of inflation and the unemployment rate returned to its natural rate of around 5% to 6%.III. Shifts in the Phillips Curve: The Role of Supply ShocksA. In 1974, OPEC increased the price of oil sharply. This increased the cost of producing many goods and services and therefore resulted in higher prices.1. Definition of supply shock : an event that directly alters firms’ costs and prices,shifting the economy’s aggregate -supply curve and thus the Phillips curve .2. Graphically, we could represent this supply shock as a shift in the short-run aggregate-supplycurve to the left.3. The decrease in equilibrium output and the increase in the price level left the economy with stagflation.Chapter 22/The Short-Run Trade-off between Inflation and Unemployment ❖ 397B. Given this turn of events, policymakers are left with a less favorable short-run trade-off between unemployment and inflation.1. If they increase aggregate demand to fight unemployment, they will raise inflation further.2. If they lower aggregate demand to fight inflation, they will raise unemployment further. C. This less favorable trade-off between unemployment and inflation can be shown by a shift of theshort-run Phillips curve. The shift may be permanent or temporary, depending on how people adjust their expectations of inflation.D. During the 1970s, the Fed decided to accommodate the supply shock by increasing the supply of money. This increased the level of expected inflation. Figure 9 shows inflation and unemploymentin the United States during the late 1970s and early 1980s.IV. The Cost of Reducing InflationA. The Sacrifice Ratio1. To reduce the inflation rate, the Fed must follow contractionary monetary policy.a. When the Fed slows the rate of growth of the money supply, aggregate demand falls.b. This reduces the level of output in the economy, increasing unemployment.c. The economy moves from point A along the short-run Phillips curve to point B, which hasa lower inflation rate but a higher unemployment rate.Price Unemployment Rate398❖Chapter 22/The Short-Run Trade-off between Inflation and Unemploymentd. Over time, people begin to adjust their inflation expectations downward and the short-run Phillips curve shifts. The economy moves from point B to point C, where inflation islower and the unemployment rate is back to its natural rate.2. Therefore, to reduce inflation, the economy must suffer through a period of highunemployment and low output.3. Definition of sacrifice ratio: the number of percentage points of annual output lostin the process of reducing inflation by one percentage point.4. A typical estimate of the sacrifice ratio is five. This implies that for each percentage pointinflation is decreased, output falls by 5%.B. Rational Expectations and the Possibility of Costless Disinflation1. Definition of rational expectations: the theory according to which people optimallyuse all the information they have, including information about governmentpolicies, when forecasting the future.2. Proponents of rational expectations believe that when government policies change, peoplealter their expectations about inflation.3. Therefore, if the government makes a credible commitment to a policy of low inflation,people would be rational enough to lower their expectations of inflation immediately. Thisimplies that the short-run Phillips curve would shift quickly without any extended period ofhigh unemployment.C. The Volcker Disinflation1. Figure 11 shows the inflation and unemployment rates that occurred while Paul Volckerworked at reducing the level of inflation during the 1980s.2. As inflation fell, unemployment rose. In fact, the United States experienced its deepest recession since the Great Depression.3. Some economists have offered this as proof that the idea of a costless disinflation suggested by rational-expectations theorists is not possible. However, there are two reasons why we might not want to reject the rational-expectations theory so quickly.a. The cost (in terms of lost output) of the Volcker disinflation was not as large as many economists had predicted.b. While Volcker promised that he would fight inflation, many people did not believe him.Few people thought that inflation would fall as quickly as it did; this likely kept the short-run Phillips curve from shifting quickly.D. The Greenspan Era1. Figure 12 shows the inflation and unemployment rate from 1984 to 2005, called the Greenspan era because Alan Greenspan became the chairman of the Federal Reserve in 1987.2. In 1986, OPEC’s agreement with its members b roke down and oil prices fell. The result of this favorable supply shock was a drop in both inflation and unemployment.3. The rest of the 1990s witnessed a period of economic prosperity. Inflation gradually dropped, approaching zero by the end of the decade. Unemployment also reached a low level, leadingmany people to believe that the natural rate of unemployment had fallen.4. The economy ran into problems in 2001 due to the end of the dot-com stock market bubble,the 9-11 terrorist attacks, and corporate accounting scandals that reduced aggregate demand. Unemployment rose as the economy experienced its first recession in a decade.5. But a combination of expansionary monetary and fiscal policies helped end the downturn,and by early 2005, the unemployment rate was close to the estimated natural rate.6. In 2005, President Bush nominated Ben Bernanke as the Fed chairman. E. A Financial Crisis Takes Us for a Ride Along the Phillips Curve1. In his first couple of years as Fed chairman, Bernanke faced some significant economicchallenges.a. One challenge arose from problems in the housing and financial markets.b. The resulting financial crisis led to a large drop in aggregate demand and high rates of unemployment.c. Figure 13 shows the implications of these events for inflation and unemployment.d. From 2007 to 2009, as the decline in aggregate demand raised unemployment, it alsoreduced the inflation rate from about 3 percent to about 1 percent.e. From 2010 to 2012, unemployment fell and the inflation rate rose from about 1 percentto about 2 percent.f. In essence, the economy first rode down the Phillips curve and then rode back up.g. Note that expected inflation and the position of the short-run Phillips curve wererelatively stable during this period.SOLUTIONS TO TEXT PROBLEMS:Quick Quizzes1. The Phillips curve is shown in Figure 1.Figure 1To see how policy can move the economy from a point with high inflation to a point with lowinflation, suppose the economy begins at point A in Figure 2. If policy is used to reduceaggregate demand (such as a decrease in the money supply or a decrease in governmentpurchases), the aggregate-demand curve shifts from AD1 to AD2, and the economy movesfrom point A to point B with lower inflation, a reduction in real GDP, and an increase in theunemployment rate.Figure 22. Figure 3 shows the short-run Phillips curve and the long-run Phillips curve. The curves aredifferent because in the long run, monetary policy has no effect on unemployment, which tends toward its natural rate. However, in the short run, monetary policy can affect the unemployment rate. An increase in the growth rate of money raises actual inflation above expected inflation, causing firms to produce more since the short-run aggregate supply curve is positively sloped, which reduces unemployment temporarily.Figure 33. Examples of favorable shocks to aggregate supply include improved productivity and adecline in oil prices. Either shock shifts the aggregate-supply curve to the right, increasing output and reducing the price level, moving the economy from point A to point B in Figure 4.As a result, the Phillips curve shifts to the left, as the figure shows.Figure 44. The sacrifice ratio is the number of percentage points of annual output lost in the process ofreducing inflation by 1 percentage point. The credibility of the Fed’s commitment to reduceinflation might affect the sacrifice ratio because it affects the speed at which expectations ofinflati on adjust. If the Fed’s commitment to reduce inflation is credible, people will reducetheir expectations of inflation quickly, the short-run Phillips curve will shift downward, andthe cost of reducing inflation will be low in terms of lost output. But if the Fed is not credible,people will not reduce their expectations of inflation quickly, and the cost of reducinginflation will be high in terms of lost output.Questions for ReviewFigure 51. Figure 5 shows the short-run trade-off between inflation and unemployment. The Fed canmove the economy from one point on this curve to another by changing the money supply.An increase in the money supply reduces the unemployment rate and increases the inflation rate, while a decrease in the money supply increases the unemployment rate and decreases the inflation rate.Figure 62. Figure 6 shows the long-run trade-off between inflation and unemployment. In the long run,there is no trade-off, as the economy must return to the natural rate of unemployment on the long-run Phillips curve. In the short run, the economy can move along a short-run Phillips curve, like SRPC1 shown in the figure. But over time (as inflation expectations adjust) the short-run Phillips curve will shift to return the economy to the long-run Phillips curve, for example shifting from SRPC1 to SRPC2.3. The natural rate of unemployment is natural because it is beyond the influence of monetarypolicy. The rate of unemployment will move to its natural rate in the long run, regardless of the inflation rate.The natural rate of unemployment might differ across countries because countries havevarying degrees of union power, minimum-wage laws, collective-bargaining laws,unemployment insurance, job-training programs, and other factors that influence labor-market conditions.4. If a drought destroys farm crops and drives up the price of food, the short-run aggregate-supply curve shifts to the left and the short-run Phillips curve shifts to the right, because the costs of production have increased. The higher short-run Phillips curve means the inflation rate will be higher for any given unemployment rate.5. When the Fed decides to reduce inflation, the economy moves down along the short-runPhillips curve, as shown in Figure 7. Beginning at point A on short-run Phillips curve SRPC1, the economy moves down to point B as inflation declines. Once people's expectations adjust to the lower rate of inflation, the short-run Phillips curve shifts to SRPC2, and the economy moves to point C. The short-run costs of disinflation, which arise because the unemployment rate is temporarily above its natural rate, could be reduced if the Fed's action was credible, so that expectations would adjust more rapidly.Figure 7Quick Check Multiple Choice1. b2. d3. c4. a5. b6. dProblems and Applications1. Figure 8 shows two different short-run Phillips curves depicting these four points. Points aand d are on SRPC1 because both have expected inflation of 3%. Points b and c are onSRPC2 because both have expected inflation of 5%.Figure 82. a. A rise in the natural rate of unemployment shifts both the long-run Phillips curve and theshort-run Phillips curve to the right, as shown in Figure 9. The economy is initially onLRPC1 and SRPC1 at an inflation rate of 3%, which is also the expected rate of inflation.The increase in the natural rate of unemployment shifts the long-run Phillips curve toLRPC2 and the short-run Phillips curve to SRPC2, with the expected rate of inflationremaining equal to 3%.Figure 9b. A decline in the price of imported oil shifts the short-run Phillips curve to the left, asshown in Figure 10, from SRPC1 to SRPC2. For any given unemployment rate, theinflation rate is lower, because oil is such a significant aspect of production costs in the economy.Figure 10c. A rise in government spending represents an increase in aggregate demand, so it movesthe economy along the short-run Phillips curve, as shown in Figure 11. The economy moves from point A to point B, with a decline in the unemployment rate and an increase in the inflation rate.Figure 11d. A decline in expected inflation causes the short-run Phillips curve to shift to the left, asshown in Figure 12. The lower rate of expected inflation shifts the short-run Phillips curve from SRPC1 to SRPC2.Figure 12Figure 133. a. Figure 13 shows how a reduction in consumer spending causes a recession in both anaggregate-supply/aggregate-demand diagram and a Phillips-curve diagram. In bothdiagrams, the economy begins at full employment at point A. The decline in consumerspending reduces aggregate demand, shifting the aggregate-demand curve to the leftfrom AD1 to AD2. The economy initially remains on the short-run aggregate-supply curve AS1, so the new equilibrium occurs at point B. The movement of the aggregate-demand curve along the short-run aggregate-supply curve leads to a movement along short-run Phillips curve SRPC1, from point A to point B. The lower price level in the aggregate-supply/aggregate-demand diagram corresponds to the lower inflation rate in the Phillips-curve diagram. The lower level of output in the aggregate-supply/aggregate-demanddiagram corresponds to the higher unemployment rate in the Phillips-curve diagram.b. As expected inflation falls over time, the short-run aggregate-supply curve shifts to theright from AS1 to AS2, and the short-run Phillips curve shifts to the left from SRPC1 toSRPC2. In both diagrams, the economy eventually gets to point C, which is back on thelong-run aggregate-supply curve and long-run Phillips curve. After the recession is over, the economy faces a better set of inflation-unemployment combinations.Figure 144. a. Figure 14 shows the economy in long-run equilibrium at point a, which is on both thelong-run and short-run Phillips curves.b. A wave of business pessimism reduces aggregate demand, moving the economy to pointb in the figure. The unemployment rate increases and the inflation rate declines. If theFed undertakes expansionary monetary policy, it can increase aggregate demand,offsetting the pessimism and returning the economy to point a, with the initial inflationrate and unemployment rate.c. Figure 15 shows the effects on the economy if the price of imported oil rises. The higherprice of imported oil shifts the short-run Phillips curve to the right from SRPC1 to SRPC2.The economy moves from point a to point c, with a higher inflation rate and higherunemployment rate. If the Fed engages in expansionary monetary policy, it can returnthe economy to its original unemployment rate at point d, but the inflation rate will behigher. If the Fed engages in contractionary monetary policy, it can return the economy to its original inflation rate at point e, but the unemployment rate will be higher. Thissituation differs from that in part (b) because in part (b) the economy stayed on thesame short-run Phillips curve, but in part (c) the economy moved to a higher short-runPhillips curve, which gives policymakers a less favorable trade-off between inflation and unemployment.。
[美]R·格伦·哈伯德《宏观经济学》R.GlennHubbard,AnthonyP
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Macroeconomics R. GLENN HUBBARD COLUMBIA UNIVERSITY ANTHONY PATRICK O’BRIEN LEHIGH UNIVERSITY MATTHEW RAFFERTY QUINNIPIAC UNIVERSITY Boston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City So Paulo Sydney Hong Kong Seoul Singapore Taipei TokyoAbout the AuthorsGlenn Hubbard Professor Researcher and Policymaker R. Glenn Hubbard is the dean and Russell L. Carson Professor of Finance and Economics in the Graduate School of Business at Columbia University and professor of economics in Columbia’s Faculty of Arts and Sciences. He is also a research associate of the National Bureau of Economic Research and a director of Automatic Data Processing Black Rock Closed- End Funds KKR Financial Corporation and MetLife. Professor Hubbard received his Ph.D. in economics from Harvard University in 1983. From 2001 to 2003 he served as chairman of the White House Council of Economic Advisers and chairman of the OECD Economy Policy Commit- tee and from 1991 to 1993 he was deputy assistant secretary of the U.S. Treasury Department. He currently serves as co-chair of the nonpar-tisan Committee on Capital Markets Regulation and the Corporate Boards Study Group. ProfessorHubbard is the author of more than 100 articles in leading journals including American EconomicReview Brookings Papers on Economic Activity Journal of Finance Journal of Financial EconomicsJournal of Money Credit and Banking Journal of Political Economy Journal of Public EconomicsQuarterly Journal of Economics RAND Journal of Economics and Review of Economics and Statistics.Tony O’Brien Award-Winning Professor and Researcher Anthony Patrick O’Brien is a professor of economics at Lehigh University. He received a Ph.D. from the University of California Berkeley in 1987. He has taught principles of economics money and banking and interme- diate macroeconomics for more than 20 years in both large sections and small honors classes. He received the Lehigh University Award for Distin- guished Teaching. He was formerly the director of the Diamond Center for Economic Education and was named a Dana Foundation Faculty Fel- low and Lehigh Class of 1961 Professor of Economics. He has been a visit- ing professor at the University of California Santa Barbara and Carnegie Mellon University. Professor O’Brien’s research has dealt with such issues as the evolution of the U.S. automobile industry sources of U.S. economiccompetitiveness the development of U.S. trade policy the causes of the Great Depression and thecauses of black–white income differences. His research has been published in leading journals in-cluding American Economic Review Quarterly Journal of Economics Journal of Money Credit andBanking Industrial Relations Journal of Economic History Explorations in Economic History andJournal of PolicyHistory.Matthew Rafferty Professor and Researcher Matthew Christopher Rafferty is a professor of economics and department chairperson at Quinnipiac University. He has also been a visiting professor at Union College. He received a Ph.D. from the University of California Davis in 1997 and has taught intermediate macroeconomics for 15 years in both large and small sections. Professor Rafferty’s research has f ocused on university and firm-financed research and development activities. In particular he is interested in understanding how corporate governance and equity compensation influence firm research and development. His research has been published in leading journals including the Journal of Financial and Quantitative Analysis Journal of Corporate Finance Research Policy and the Southern Economic Journal. He has worked as a consultantfor theConnecticut Petroleum Council on issues before the Connecticut state legislature. He has alsowritten op-ed pieces that have appeared in several newspapers including the New York Times. iii Brief Contents Part 1: Introduction Chapter 1 The Long and Short of Macroeconomics 1 Chapter 2 Measuring the Macroeconomy 23 Chapter 3 The Financial System 59 Part 2: Macroeconomics in the Long Run: Economic Growth Chapter 4 Determining Aggregate Production 105 Chapter 5 Long-Run Economic Growth 143 Chapter 6 Money and Inflation 188 Chapter 7 The Labor Market 231 Part 3: Macroeconomics in the Short Run: Theory and Policy Chapter 8 Business Cycles 271 Chapter 9 IS–MP: A Short-Run Macroeconomic Model 302 Chapter 10 Monetary Policy in the Short Run 363 Chapter 11 Fiscal Policy in the Short Run 407 Chapter 12 Aggregate Demand Aggregate Supply and Monetary Policy 448 Part 4: Extensions Chapter 13 Fiscal Policy and the Government Budget in the Long Run 486 Chapter 14 Consumption and Investment 521 Chapter 15 The Balance of Payments Exchange Rates and Macroeconomic Policy 559 Glossary G-1 Index I-1ivContentsChapter 1 The Long and Short of Macroeconomics 1WHEN YOU ENTER THE JOB MARKET CAN MATTER A LOT ........................................................ 11.1 What Macroeconomics Is About........................................................................... 2 Macroeconomics in the Short Run and in the Long Run .................................................... 2 Long-Run Growth in the United States ............................................................................. 3 Some Countries Have Not Experienced Significant Long-Run Growth ............................... 4 Aging Populations Pose a Challenge to Governments Around the World .......................... 5 Unemployment in the United States ................................................................................. 6 How Unemployment Rates Differ Across Developed Countries ......................................... 7 Inflation Rates Fluctuate Over Time and Across Countries................................................. 7 Econo mic Policy Can Help Stabilize the Economy .. (8)International Factors Have Become Increasingly Important in Explaining Macroeconomic Events................................................................................. 91.2 How Economists Think About Macroeconomics ............................................. 11 What Is the Best Way to Analyze Macroeconomic Issues .............................................. 11 Macroeconomic Models.................................................................................................. 12Solved Problem 1.2: Do Rising Imports Lead to a Permanent Reductionin U.S. Employment. (12)Assumptions Endogenous Variables and Exogenous Variables in EconomicModels ........................................................................................................ 13 Forming and Testing Hypotheses in Economic Models .................................................... 14Making the Connection: What Do People Know About Macroeconomicsand How Do They KnowIt .............................................................................................. 151.3 Key Issues and Questions of Macroeconomics ............................................... 16An Inside Look: Will Consumer Spending Nudge Employers to Hire................................ 18Chapter Summary and Problems ............................................................................. 20 Key Terms and Concepts Review Questions Problems and Applications Data Exercise Theseend-of-chapter resource materials repeat in all chapters.Chapter 2 Measuring the Macroeconomy 23HOW DO WE KNOW WHEN WE ARE IN ARECESSION ........................................................... 23Key Issue andQuestion .................................................................................................... 232.1 GDP: Measuring Total Production and Total Income ..................................... 25 How theGovernment Calculates GDP (25)Production and Income (26)The Circular Flow of Income (27)An Example of Measuring GDP (29)National Income Identities and the Components of GDP (29)vvi CONTENTS Making the Connection: Will Public Employee Pensions Wreck State and Local Government Budgets.................................................................... 31 The Relationship Between GDP and GNP........................................................................ 33 2.2 Real GDP Nominal GDP and the GDP Deflator.............................................. 33 Solved Problem 2.2a: Calculating Real GDP . (34)Price Indexes and the GDP Deflator (35)Solved Problem 2.2b: Calculating the Inflation Rate ..........................................................36 The Chain-Weighted Measure of Real GDP ....................................................................37 Making the Connection: Trying to Hit a Moving Target: Forecasting with “Real-Time Data” .................................................................................. 37 Comparing GDP Across Countries................................................................................... 38 Making the Connection: The Incredible Shrinking Chinese Economy ................................ 39 GDP and National Income .............................................................................................. 40 2.3 Inflation Rates and Interest Rates ....................................................................... 41 The Consumer Price Index .............................................................................................. 42 Making the Connection: Does Indexing Preserve the Purchasing Power of Social Security Payments ................................................................ 43 How Accurate Is theCPI ............................................................................................... 44 The Way the Federal Reserve Measures Inflation ............................................................ 44 InterestRates .................................................................................................................. 45 2.4 Measuring Employment and Unemployment .. (47)Answering the Key Question ............................................................................................ 49 An Inside Look: Weak Construction Market Persists.......................................................... 50 Chapter 3 The Financial System 59 THE WONDERFUL WORLD OFCREDIT ................................................................................... 59 Key Issue and Question .................................................................................................... 59 3.1 Overview of the Financial System ...................................................................... 60 Financial Markets and Financial Intermediaries ................................................................ 61 Making the Connection: Is General Motors Making Cars or Making Loans .................... 62 Making the Connection: Investing in the Worldwide Stock Market . (64)Banking and Securitization (67)The Mortgage Market and the Subprime Lending Disaster (67)Asymmetric Information and Principal–Agent Problems in Financial Markets...................68 3.2 The Role of the Central Bank in the Financial System (69)Central Banks as Lenders of Last Resort ..........................................................................69 Bank Runs Contagion and Asset Deflation ....................................................................70 Making the Connection: Panics Then and Now: The Collapse of the Bank of United States in 1930 and the Collapse of Lehman Brothers in2008 (71)3.3 Determining Interest Rates: The Market for Loanable Funds and the Market forMoney .......................................................................................... 76 Saving and Supply in the Loanable Funds Market ........................................................... 76 Investment and the Demand for Loanable Funds ............................................................ 77 Explaining Movements in Saving Investment and the Real Interest Rate (78)CONTENTS .。
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没有单一的模型能够说明我们关注的所 有问题：
Why does the cost of living keep rising? Why are millions of people unemployed? Why are there recessions? Can
policymakers do anything? Should they? What is the government deficit? How does
对古典经济学理论的著名 批评：
长期是对当前事情的一个误导。在长期中我们
都会死。如果在暴风雨季节，经济学家只能告
诉我们，暴风雨在长期中会过去，海洋必将平
静，那么他们给自己的任务就太容易且无用了
总需求与总供给 41
【国际经济学专题考试试卷三十四】The Influence of Monetary and Fiscal Policy On Aggregate Demand
Chapter 34The Influence of Monetary and Fiscal Policy On Aggregate DemandTRUE/FALSE1. Both monetary policy and fiscal policy affect aggregate demand.ANS: T DIF: 1 REF: 34-0NAT: Analytic LOC: Monetary and fiscal policyTOP: Monetary policy | Fiscal policy MSC: Definitional2. For the U.S. economy, the most important reason for the downward slope of the aggregate-demand curve isthe interest-rate effect.ANS: T DIF: 2 REF: 34-1NAT: Analytic LOC: Aggregate demand and aggregate supplyTOP: Interest-rate effect MSC: Interpretive3. According to the theory of liquidity preference, the interest rate adjusts to balance the supply of, and demandfor, loanable funds.ANS: F DIF: 2 REF: 34-1NAT: Analytic LOC: The role of moneyTOP: Theory of liquidity preference MSC: Interpretive4. The theory of liquidity preference was developed by Irving Fisher.ANS: F DIF: 1 REF: 34-1NAT: Analytic LOC: The role of moneyTOP: Theory of liquidity preference | Economists MSC: Interpretive5. An increase in the money supply decreases the equilibrium interest rate and shifts the aggregate-demand curveto the right.ANS: T DIF: 2 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Monetary injectionsMSC: Interpretive6. Other things the same, an increase in the price level causes the real value of the dollar to fall in the market forforeign-currency exchange.ANS: F DIF: 2 REF: 34-1NAT: Analytic LOC: Aggregate demand and aggregate supplyTOP: Exchange-rate effect MSC: Applicative7. Changes in monetary policy aimed at reducing aggregate demand involve decreasing the money supply orincreasing the interest rate.ANS: T DIF: 2 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Monetary policyMSC: Interpretive8. For the most part, fiscal policy affects the economy in the short run while monetary policy primarily matters inthe long run.ANS: F DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policyTOP: Fiscal policy | Monetary policy MSC: Interpretive9. For a country such as the U.S., the wealth effect exerts a very important influence on the slope of theaggregate-demand curve, since U.S. wealth is large relative to wealth in most other countries.ANS: F DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Wealth effectMSC: Interpretive10. If the inflation rate is zero, then the nominal and real interest rate are the same.ANS: T DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policyTOP: Nominal interest rate | Real interest rate MSC: Interpretive22512252 Chapter 34/The Influence of Monetary and Fiscal Policy On Aggregate Demand11. In liquidity preference theory, an increase in the interest rate, other things the same, decreases the quantity ofmoney demanded, but does not shift the money demand curve.ANS: T DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policyTOP: Theory of liquidity preference MSC: Analytical12. An increase in the price level shifts the money demand curve to the left, causing interest rates to increase. ANS: F DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Money demandMSC: Interpretive13. An increase in the money supply shifts the aggregate-supply curve to the right.ANS: F DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Monetary policyMSC: Interpretive14. When the Fed increases the money supply, the interest rate decreases. This decrease in the interest rateincreases consumption and investment demand, so the aggregate-demand curve shifts to the right.ANS: T DIF: 2 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policyTOP: Monetary policy | Aggregate-demand curve MSC: Analytical15. Stock prices often rise when the Fed raises interest rates.ANS: F DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policyTOP: Stock market | Monetary policy MSC: Interpretive16. When the Fed announces a target for the federal funds rate, it essentially accommodates the day-to-dayfluctuations in money demand by adjusting the money supply accordingly.ANS: T DIF: 2 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policyTOP: Federal funds rate | Monetary policy MSC: Interpretive17. If the marginal propensity to consume is 6/7, then the multiplier is 7.ANS: T DIF: 2 REF: 34-2NAT: Analytic LOC: Monetary and fiscal policy TOP: Multiplier effectMSC: Applicative18. If the marginal propensity to consume is 4/5, then a decrease in government spending of $1 billion decreasesthe demand for goods and services by $5 billion.ANS: T DIF: 2 REF: 34-2NAT: Analytic LOC: Monetary and fiscal policy TOP: Multiplier effectMSC: Applicative19. Both the multiplier effect and the investment accelerator tend to make the aggregate-demand curve shiftfurther than it does due to an initial increase in government expenditures.ANS: T DIF: 1 REF: 34-2NAT: Analytic LOC: Monetary and fiscal policy TOP: Multiplier effect | Investment MSC: Applicative20. The multiplier is computed as MPC / (1 - MPC).ANS: F DIF: 1 REF: 34-2NAT: Analytic LOC: Monetary and fiscal policy TOP: Multiplier effectMSC: Definitional21. Permanent tax cuts have a larger impact on consumption spending than temporary ones.ANS: T DIF: 1 REF: 34-2NAT: Analytic LOC: Monetary and fiscal policy TOP: TaxesMSC: ApplicativeChapter 34/The Influence of Monetary and Fiscal Policy On Aggregate Demand 2253 22. Some economists, called supply-siders, argue that changes in the money supply exert a strong influence onaggregate supply.ANS: F DIF: 2 REF: 34-2NAT: Analytic LOC: Monetary and fiscal policy TOP: Supply-side economicsMSC: Applicative23. In principle, the government could increase the money supply or increase government expenditures to try tooffset the effects of a wave of pessimism about the future of the economy.ANS: T DIF: 1 REF: 34-3NAT: Analytic LOC: Monetary and fiscal policyTOP: Stabilization policy | Expectations MSC: Applicative24. The main criticism of those who doubt the ability of the government to respond in a useful way to the businesscycle is that the theory by which money and government expenditures change output is flawed.ANS: F DIF: 2 REF: 34-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Stabilization policyMSC: Definitional25. A significant lag for monetary policy is the time it takes to for a change in the money supply to change theeconomy. A significant lag for fiscal policy is the time it takes to pass legislation authorizing it.ANS: T DIF: 1 REF: 34-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Stabilization policyMSC: Definitional26. Unemployment insurance and welfare programs work as automatic stabilizers.ANS: T DIF: 1 REF: 34-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Automatic stabilizersMSC: Definitional27. Depending on the size of the multiplier and crowding-out effects, the rightward shift in aggregate demandfrom a tax cut could be larger or smaller than the tax cut.ANS: T DIF: 2 REF: 34-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Multiplier effectMSC: Analytic28. During recessions, unemployment insurance payments tend to rise.ANS: T DIF: 2 REF: 34-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Automatic stabilizersMSC: Interpretive29. During recessions, the government tends to run a budget deficit.ANS: T DIF: 1 REF: 34-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Automatic stabilizersMSC: Applicative30. An implication of the Employment Act of 1946 is that the government should respond to changes in theprivate economy to stabilize aggregate demand.ANS: T DIF: 2 REF: 34-3NAT: Analytic LOC: Monetary and fiscal policy TOP: Employment Act of 1946MSC: InterpretiveSHORT ANSWER1. What is the difference between monetary policy and fiscal policy?ANS:The Federal Reserve Bank conducts U.S. monetary policy. It consists of policies to affect the financial side of the economy-most notably the supply of money in the economy. Fiscal policy is conducted by the executive and legislative branches of government, and entails decisions about taxes and government spending.DIF: 2 REF: 34-1 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Fiscal policy | Monetary policyMSC: Definitional2254 Chapter 34/The Influence of Monetary and Fiscal Policy On Aggregate Demand2. There are three factors that help explain the slope of the aggregate demand curve. Which two are lessimportant? Why are they less important?ANS:The wealth effect and the exchange-rate effect are less important than the interest-rate effect in the United States. The wealth effect is not very important because it operates through changes in the real value of money, and money is only a small fraction of household wealth. So it is unlikely that changes in the price level will lead to large changes in consumption spending through this channel. The exchange-rate effect is not very important in the United States because trade with other countries represents a relatively small fraction of U.S. GDP. So a change in net-exports due to a change in the exchange rate is likely to have a relatively small impact on real GDP.DIF: 2 REF: 34-1 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Wealth effect | Exchange-rate effectMSC: Analytical3. Explain why the interest rate is the opportunity cost of holding currency. What is the benefit of holdingcurrency?ANS:The nominal interest rate on currency is zero. The next best alternative is to buy a bond and earn interest. Currency is used as a medium of exchange. Bonds are illiquid and so are costly to convert to a medium of exchange.DIF: 2 REF: 34-1 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Currency | Interest ratesMSC: Interpretive4. Describe the process in the money market by which the interest rate reaches its equilibrium value if it startsabove equilibrium.ANS:If the interest rate is above equilibrium, there is an excess supply of money. People with more money than they want to hold given the current interest rate deposit the money in banks and buy bonds. The increase in funds to lend out causes the interest rate to fall. As the interest rate falls, the quantity of money demanded increases, which tends to diminish the excess supply of money.DIF: 3 REF: 34-1 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Money marketMSC: Analytical5. Use the money market to explain the interest-rate effect and its relation to the slope of the aggregate demandcurve.ANS:When the price level falls, people need less money for their transactions. The decreased demand for money leads to a decrease in interest rates as money demand shifts left. Lower interest rates encourage consumption and investment spending. Thus, a decrease in the price level raises the aggregate quantity of goods and services demanded.DIF: 2 REF: 34-1 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Interest-rate effectMSC: Analytical6. Explain the logic according to liquidity preference theory by which an increase in the money supply changesthe aggregate demand curve.ANS:When the money supply increases, the interest rate falls. As the interest rate falls people will want to spend more and firms will want to build more factories and other capital goods. This increase in aggregate demand happens for any given price level, so aggregate demand shifts right.DIF: 2 REF: 34-1 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Monetary policy | Aggregate-demand curveMSC: AnalyticalChapter 34/The Influence of Monetary and Fiscal Policy On Aggregate Demand 2255 7. How does a reduction in the money supply by the Fed make owning stocks less attractive?ANS:The reduction in the money supply raises the interest rate. So the return on bonds increases relative to the return on stocks. The increase in the interest rate also causes spending to fall, so that revenues and profits fall, making shares of ownership in corporations less valuable.DIF: 2 REF: 34-1 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Money supply | Stock marketMSC: Applicative8. Suppose that the government spends more on a missile defense program. What does this do to aggregatedemand? How is you answer affected by the presence of the multiplier, crowding-out, taxes, andinvestment-accelerator effects?ANS:The increase in expenditures means that government spending rises. The aggregate demand curve shifts to the right. Aggregate demand shifts farther if there is a multiplier effect or an investment accelerator and shifts less if there is crowding out or if taxes are raised to increase government expenditures.DIF: 2 REF: 34-2 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Multiplier effect | Crowding out | InvestmentMSC: Interpretive9. Suppose that there are no crowding-out effects and the MPC is .9. By how much must the governmentincrease expenditures to shift the aggregate demand curve right by $10 billion?ANS:An MPC of .9 means the multiplier = 1/(1 - .9) = 10. The increase in aggregate demand equals the multiplier times the change in government expenditures. So to increase aggregate demand by $10 billion, the government would have to increase expenditures by $1 billion.DIF: 2 REF: 34-2 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Multiplier effectMSC: Analytical10. Suppose that the government increases expenditures by $150 billion while increasing taxes by $150 billion.Suppose that the MPC is .80 and that there are no crowding out or accelerator effects. What is the combined effects of these changes? Why is the combined change not equal to zero?ANS:The multiplier is 1/(1-MPC) = 1/(1-.8) = 1/.2 = 5. The increase of $150 in government expenditures leads to a shift of $150 billion x 5 = $750 billion in aggregate demand. The increase in taxes decreases income by $150 and so initially decreases consumption by $150 billion x MPC = $150 billion x .8 = $120 billion. This change in consumption will create a multiplier effect of $120 billion x 5 = $600. Thus the net change is $750 billion - $600 billion = $150 billion. The changes don’t cancel each other out, because a tax increase decreases consumption by less than the tax increase.DIF: 3 REF: 34-3 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Multiplier effect | TaxesMSC: Analytical11. Suppose that consumers become pessimistic about the future health of the economy. What will happen toaggregate demand and to output? What might the president and Congress have to do to keep output stable? ANS:As consumers become pessimistic about the future of the economy, they cut their expenditures so that aggregate demand shifts left and output falls. The president and Congress could adjust fiscal policy to increase aggregate demand. They could either increase government spending, or cut taxes, or both.DIF: 2 REF: 34-3 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Stabilization policy | ExpectationsMSC: Analytical2256 Chapter 34/The Influence of Monetary and Fiscal Policy On Aggregate Demand12. Explain how unemployment insurance acts as an automatic stabilizer.ANS:As income falls, unemployment rises. More people will apply for unemployment compensation from the government which raises government spending. An increase in government spending tends to increase aggregate demand, output, and income thereby lessening the effects of the recession.DIF: 2 REF: 34-3 NAT: AnalyticLOC: Monetary and fiscal policy TOP: Automatic stabilizersMSC: ApplicativeSec00 - The Influence of Monetary and Fiscal Policy on Aggregate Demand MULTIPLE CHOICE1. Shifts in the aggregate-demand curve can cause fluctuations ina.neither the level of output nor the level of prices.b.the level of output, but not in the level of prices.c.the level of prices, but not in the level of output.d.the level of output and in the level of prices.ANS: D DIF: 1 REF: 34-0NAT: Analytic LOC: Aggregate demand and aggregate supplyTOP: Economic fluctuations | Aggregate demand MSC: Interpretive2. Fiscal policy affects the economya.only in the short run.b.only in the long run.c.in both the short and long run.d.in neither the short nor the long run.ANS: C DIF: 1 REF: 34-0NAT: Analytic LOC: Monetary and fiscal policy TOP: Fiscal policyMSC: InterpretiveSec01 - The Influence of Monetary and Fiscal Policy on Aggregate Demand - How Monetary Policy Influences Aggregate DemandMULTIPLE CHOICE1. The interest-rate effecta.depends on the idea that increases in interest rates increase the quantity of money demanded.b.depends on the idea that increases in interest rates increase the quantity of money supplied.c.is the most important reason, in the case of the United States, for the downward slope of theaggregate-demand curve.d.is the least important reason, in the case of the United States, for the downward slope of theaggregate-demand curve.ANS: C DIF: 2 REF: 34-1NAT: Analytic LOC: Aggregate demand and aggregate supplyTOP: Interest-rate effect MSC: Interpretive2. The interest-rate effecta.depends on the idea that increases in interest rates decrease the quantity of goods and servicesdemanded.b.depends on the idea that increases in interest rates decrease the quantity of goods and servicessupplied.c.is responsible for the downward slope of the money-demand curve.d.is the least important reason, in the case of the United States, for the downward slope of theaggregate-demand curve.ANS: A DIF: 2 REF: 34-1NAT: Analytic LOC: Aggregate demand and aggregate supplyTOP: Interest-rate effect MSC: InterpretiveChapter 34/The Influence of Monetary and Fiscal Policy On Aggregate Demand 22573. The wealth effect stems from the idea that a higher price levela.increases the real value of households’ money holdings.b.decreases the real value of households’ money holdings.c.increases the real value of the domestic currency in foreign-exchange markets.d.decreases the real value of the domestic currency in foreign-exchange markets.ANS: B DIF: 2 REF: 34-1NAT: Analytic LOC: Aggregate demand and aggregate supplyTOP: Wealth effect MSC: Interpretive4. With respect to their impact on aggregate demand for the U.S. economy, which of the following represents thecorrect ordering of the wealth effect, interest-rate effect, and exchange-rate effect from most important to least important?a.wealth effect, exchange-rate effect, interest-rate effectb.exchange-rate effect, interest-rate effect, wealth effectc.interest-rate effect, wealth effect, exchange-rate effectd.interest-rate effect, exchange-rate effect, wealth effectANS: D DIF: 2 REF: 34-1NAT: Analytic LOC: Aggregate demand and aggregate supplyTOP: Aggregate-demand curve MSC: Interpretive5. For the U.S. economy, which of the following is the most important reason for the downward slope of theaggregate-demand curve?a.the wealth effectb.the interest-rate effectc.the exchange-rate effectd.the real-wage effectANS: B DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Interest-rate effectMSC: Definitional6. Which of the following is likely more important for explaining the slope of the aggregate-demand curve of asmall economy than it is for the United States?a.the wealth effectb.the interest-rate effectc.the exchange-rate effectd.the real-wage effectANS: C DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Exchange-rate effectMSC: Interpretive7. For the U.S. economy, which of the following helps explain the slope of the aggregate-demand curve?a.An increase in the price level decreases the interest rate.b.An increase in the price level increases the interest rate.c.An increase in the money supply decreases the interest rate.d.An increase in the money supply increases the interest rate.ANS: B DIF: 2 REF: 34-1NAT: Analytic LOC: Aggregate demand and aggregate supplyTOP: Interest-rate effect MSC: Analytic2258 Chapter 34/The Influence of Monetary and Fiscal Policy On Aggregate Demand8. The wealth effect helps explain the slope of the aggregate-demand curve. This effect isa.relatively important in the United States because expenditures on consumer durables is veryresponsive to changes in wealth.b.relatively important in the United States because consumption spending is a large part of GDP.c.relatively unimportant in the United States because money holdings are a small part of consumerwealth.d.relatively unimportant because it takes a large change in wealth to cause a significant change ininterest rates.ANS: C DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Wealth effectMSC: Definitional9. Which of the following claims concerning the importance of effects that explain the slope of the U.S.aggregate-demand curve is correct?a.The exchange-rate effect is relatively small because exports and imports are a small part of realGDP.b.The interest-rate effect is relatively small because investment spending is not very responsive tointerest rate changes.c.The wealth effect is relatively large because money holdings are a significant portion of mosthouseholds' wealth.d.None of the above is correct.ANS: A DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Aggregate-demand slope MSC: Interpretive10. Which particular interest rate(s) do we attempt to explain using the theory of liquidity preference?a.only the nominal interest rateb.both the nominal interest rate and the real interest ratec.only the interest rate on long-term bondsd.only the interest rate on short-term government bondsANS: B DIF: 2 REF: 34-1NAT: Analytic LOC: The role of moneyTOP: Theory of liquidity preference MSC: Interpretive11. According to John Maynard Keynes,a.the demand for money in a count ry is determined entirely by that nation’s central bank.b.the supply of money in a country is determined by the overall wealth of the citizens of that country.c.the interest rate adjusts to balance the supply of, and demand for, money.d.the interest rate adjusts to balance the supply of, and demand for, goods and services.ANS: C DIF: 2 REF: 34-1NAT: Analytic LOC: The role of moneyTOP: Theory of liquidity preference MSC: Interpretive12. According to the theory of liquidity preference,a.if the interest rate is below the equilibrium level, then the quantity of money people want to hold isless than the quantity of money the Fed has created.b.if the interest rate is above the equilibrium level, then the quantity of money people want to hold isgreater than the quantity of money the Fed has created.c.the demand for money is represented by a downward-sloping line on a supply-and-demand graph.d.All of the above are correct.ANS: C DIF: 2 REF: 34-1NAT: Analytic LOC: The role of moneyTOP: Theory of liquidity preference MSC: InterpretiveChapter 34/The Influence of Monetary and Fiscal Policy On Aggregate Demand 225913. According to classical macroeconomic theory,a.the price level is sticky in the short run and it plays only a minor role in the short-run adjustmentprocess.b.for any given level of output, the interest rate adjusts to balance the supply of, and demand for,money.c.output is determined by the supplies of capital and labor and the available production technology.d.All of the above are correct.ANS: C DIF: 2 REF: 34-1NAT: Analytic LOC: The role of money TOP: Classical dichotomyMSC: Interpretive14. According to classical macroeconomic theory,a.output is determined by the supplies of capital and labor and the available production technology.b.for any given level of output, the interest rate adjusts to balance the supply of, and demand for,loanable funds.c.given output and the interest rate, the price level adjusts to balance the supply of, and demand for,money.d.All of the above are correct.ANS: D DIF: 2 REF: 34-1NAT: Analytic LOC: The role of money TOP: Classical dichotomyMSC: Interpretive15. According to the liquidity preference theory, an increase in the overall price level of 10 percenta.increases the equilibrium interest rate, which in turn decreases the quantity of goods and servicesdemanded.b.decreases the equilibrium interest rate, which in turn increases the quantity of goods and servicesdemanded.c.increases the quantity of money supplied by 10 percent, leaving the interest rate and the quantity ofgoods and services demanded unchanged.d.decreases the quantity of money demanded by 10 percent, leaving the interest rate and the quantityof goods and services demanded unchanged.ANS: A DIF: 2 REF: 34-1NAT: Analytic LOC: The role of moneyTOP: Theory of liquidity preference MSC: Interpretive16. On the graph that depicts the theory of liquidity preference,a.the demand-for-money curve is vertical.b.the supply-of-money curve is vertical.c.the interest rate is measured along the horizontal axis.d.the price level is measured along the vertical axis.ANS: B DIF: 1 REF: 34-1NAT: Analytic LOC: The role of moneyTOP: Theory of liquidity preference MSC: Interpretive17. Using the liquidity-preference model, when the Federal Reserve increases the money supply,a.the equilibrium interest rate decreases.b.the aggregate-demand curve shifts to the left.c.the quantity of goods and services demanded is unchanged for a given price level.d.the long-run aggregate-supply curve shifts to the right.ANS: A DIF: 2 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policyTOP: Theory of liquidity preference | Monetary policy MSC: Interpretive2260 Chapter 34/The Influence of Monetary and Fiscal Policy On Aggregate Demand18. In recent years, the Federal Reserve has conducted policy by setting a target for thea.size of the money supply.b.growth rate of the money supply.c.federal funds rate.d.discount rate.ANS: C DIF: 2 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policyTOP: Federal funds rate | Monetary policy MSC: Definitional19. While a television news re porter might state that “Today the Fed lowered the federal funds rate from 5.5percent to 5.25 percent,” a more precise account of the Fed’s action would be as follows:a.“Today the Fed told its bond traders to conduct open-market operations in such a way that theequilibrium federal funds rate would decrease to 5.25 percent.”b.“Today the Fed lowered the discount rate by a quarter of a percentage point, and this action willforce the federal funds rate to drop by the same amount.”c.“Today the Fed to ok steps to decrease the money supply by an amount that is sufficient to decreasethe federal funds rate to 5.25 percent.”d.“Today the Fed took a step toward contracting aggregate demand, and this was done by loweringthe federal funds rate to 5.25 perc ent.”ANS: A DIF: 2 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policyTOP: Federal funds rate | Monetary policy MSC: Interpretive20. Monetary policya.must be described in terms of interest-rate targets.b.must be described in terms of money-supply targets.c.can be described either in terms of the money supply or in terms of the interest rate.d.cannot be accurately described in terms of the interest rate or in terms of the money supply.ANS: C DIF: 2 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Monetary policyMSC: Interpretive21. Which of the following is not a reason the aggregate-demand curve slopes downward? As the price levelincreases,a.firms may believe the relative price of their output has risen.b.real wealth declines.c.the interest rate increases.d.the exchange rate increases.ANS: A DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Aggregate-demand slope MSC: Definitional22. Which of the following would not be an expected response from a decrease in the price level and so help toexplain the slope of the aggregate-demand curve?a.When interest rates fall, Sleepwell Hotels decides to build some new hotels.b.The exchange rate falls, so French restaurants in Paris buy more Iowa pork.c.Janet feels wealthier because of the price-level decrease and so she decides to remodel herbathroom.d.With prices down and wages fixed by contract, Millio’s Frozen Pizzas decides to lay off workers. ANS: D DIF: 1 REF: 34-1NAT: Analytic LOC: Monetary and fiscal policy TOP: Aggregate demand slope MSC: Interpretive。
曼昆经济学原理英文书
曼昆经济学原理英文书The Economics Principles by MankiwChapter 1: Ten Principles of EconomicsChapter 2: Thinking Like an EconomistChapter 3: Interdependence and the Gains from Trade Chapter 4: The Market Forces of Supply and Demand Chapter 5: Elasticity and Its ApplicationChapter 6: Supply, Demand, and Government Policies Chapter 7: Consumers, Producers, and Efficiency of Markets Chapter 8: Application: The Costs of TaxationChapter 9: Application: International TradeChapter 10: ExternalitiesChapter 11: Public Goods and Common Resources Chapter 12: The Design of the Tax SystemChapter 13: The Costs of ProductionChapter 14: Firms in Competitive MarketsChapter 15: MonopolyChapter 16: Monopolistic CompetitionChapter 17: OligopolyChapter 18: The Markets for Factors of Production Chapter 19: Earnings and DiscriminationChapter 20: Income Inequality and PovertyChapter 21: Introduction to MacroeconomicsChapter 22: Measuring a Nation's IncomeChapter 23: Measuring the Cost of LivingChapter 24: Production and GrowthChapter 25: Saving, Investment, and the Financial System Chapter 26: The Basic Tools of FinanceChapter 27: UnemploymentChapter 28: The Monetary SystemChapter 29: Money Growth and InflationChapter 30: Open-Economy Macroeconomics: Basic Concepts Chapter 31: A Macroeconomic Theory of the Open Economy Chapter 32: Aggregate Demand and Aggregate SupplyChapter 33: The Influence of Monetary and Fiscal Policy on Aggregate DemandChapter 34: The Short-Run Trade-Off between Inflation and UnemploymentChapter 35: The Theory of Consumer ChoiceChapter 36: Frontiers of MicroeconomicsChapter 37: Monopoly and Antitrust PolicyChapter 38: Oligopoly and Game TheoryChapter 39: Externalities, Public Goods, and Environmental Policy Chapter 40: Uncertainty and InformationChapter 41: Aggregate Demand and Aggregate Supply Analysis Chapter 42: Understanding Business CyclesChapter 43: Fiscal PolicyChapter 44: Money, Banking, and Central BankingChapter 45: Monetary PolicyChapter 46: Inflation, Disinflation, and DeflationChapter 47: Exchange Rates and the International Financial SystemChapter 48: The Short - Run Trade - Off between Inflation and Unemployment RevisitedChapter 49: Macroeconomic Policy: Challenges in the Twenty - First CenturyEpilogue: 14 Big IdeasNote: The chapter titles have been abbreviated for simplicity and brevity purposes.。
Lecture11
HOW R IS DETERMINED
Interest rate r1 Eq’m interest rate MS MS curve is vertical: Changes in r do not affect MS, which is fixed by the Fed. MD curve is downward sloping: A fall in r increases money demand.
ANSWER
B. Suppose P rises, but Y and r are unchanged. What
happens to money demand? If Y is unchanged, people will want to buy the same amount of goods & services. Since P is higher, they will need more money to do so. Hence, an increase in P causes an increase in money demand, other things equal.
FISCAL POLICY AND AGGREGATE DEMAND
Fiscal policy: the setting of the level of government spending and taxation by government policymakers Expansionary fiscal policy
More precisely, the federal funds rate – which banks charge each other on short-term loans
经济学原理 曼昆第五版英文答案Chapter34
1. Definition of automatic stabilizers: changes in fiscal policy that stimulate aggregatedemand when the economy goes into a recession without policymakers having totake any deliberate action.2. The most important automatic stabilizer is the tax system.a. When the economy falls into a recession, incomes and profits fall.b. The personal income tax depends on the level of households’ incomes and the corporateincome tax depends on the level of firm profits.c. This implies that the government’s tax revenue falls during a recession. This tax cutstimulates aggregate demand and reduces the magnitude of this economic downturn.3. Government spending is also an automatic stabilizer.a. More individuals become eligible for transfer payments during a recession.b. These transfer payments provide additional income to recipients, stimulating spending.c. Thus, just like the tax system, our system of transfer payments helps to reduce the sizeof short-run economic fluctuations.SOLUTIONS TO TEXT PROBLEMS:Quick Quizzes1. According to the theory of liquidity preference, the interest rate adjusts to balance the supplyand demand for money. Therefore, a decrease in the money supply will increase theequilibrium interest rate. This decrease in the money supply reduces aggregate demandbecause the higher interest rate causes households to buy fewer houses, reducing thedemand for residential investment, and causes firms to spend less on new factories and newequipment, reducing business investment.2. If the government reduces spending on highway construction by $10 billion, the aggregate-demand curve shifts to the left because government purchases are lower. The shift to theleft of the aggregate-demand curve could be more than $10 billion if the multiplier effectoutweighs the crowding-out effect, or it could be less than $10 billion if the crowding-outeffect outweighs the multiplier effect.3. If people become pessimistic about the future, they will spend less, causing the aggregate-demand curve to shift to the left. If the Fed wants to stabilize aggregate demand, it shouldincrease the money supply. The increase in the money supply will cause the interest rate todecline, thus stimulating residential and business investment. The Fed might choose not to dothis because by the time the policy action takes effect, the long lag time might mean theeconomy would have recovered on its own, and the increase in the money supply will causeinflation.1. The theory of liquidity preference is Keynes's theory of how the interest rate is determined.According to the theory, the aggregate-demand curve slopes downward because: (1) ahigher price level raises money demand; (2) higher money demand leads to a higher interest rate; and (3) a higher interest rate reduces the quantity of goods and services demanded.Thus, the price level has a negative relationship with the quantity of goods and servicesdemanded.2. A decrease in the money supply shifts the money-supply curve to the left. The equilibriuminterest rate will rise. The higher interest rate reduces consumption and investment, soaggregate demand falls. Thus, the aggregate-demand curve shifts to the left.3. If the government spends $3 billion to buy police cars, aggregate demand might increase bymore than $3 billion because of the multiplier effect on aggregate demand. Aggregatedemand might increase by less than $3 billion because of the crowding-out effect onaggregate demand.4. If pessimism sweeps the country, households reduce consumption spending and firms reduceinvestment, so aggregate demand falls. If the Fed wants to stabilize aggregate demand, it must increase the money supply, reducing the interest rate, which will induce households to save less and spend more and will encourage firms to invest more, both of which willincrease aggregate demand. If the Fed does not increase the money supply, Congress could increase government purchases or reduce taxes to increase aggregate demand.5. Government policies that act as automatic stabilizers include the tax system and governmentspending through the unemployment-benefit system. The tax system acts as an automatic stabilizer because when incomes are high, people pay more in taxes, so they cannot spend as much. When incomes are low, so are taxes; thus, people can spend more. The result is that spending is partly stabilized. Government spending through the unemployment-benefit system acts as an automatic stabilizer because in recessions the government transfers money to the unemployed so their incomes do not fall as much and thus their spending will not fall as much.1. a. When more ATMs are available, money demand is reduced and the money-demand curveshifts to the left from MD1 to MD2, as shown in Figure 6. If the Fed does not change the money supply, which is at MS1, the interest rate will decline from r1 to r2. The decline inthe interest rate shifts the aggregate-demand curve to the right, as consumption andinvestment increase.b. If the Fed wants to stabilize aggregate demand, it should reduce the money supply to MS, so the interest rate will remain at r1 and aggregate demand will not change.22. a. When the Fed’s bond traders buy bonds in open-market operations, the money-supplycurve shifts to the right from MS1 to MS2, as shown in Figure 1. The result is a decline in the interest rate.Figure 1Figure 2b. When an increase in credit card availability reduces the cash people hold, the money-demand curve shifts to the left from MD1 to MD2, as shown in Figure 2. The result is a decline in the interest rate.c. When the Federal Reserve reduces reserve requirements, the money supply increases, sothe money-supply curve shifts to the right from MS1 to MS2, as shown in Figure 1. The result is a decline in the interest rate.d. When households decide to hold more money to use for holiday shopping, the money-demand curve shifts to the right from MD1 to MD2, as shown in Figure 3. The result is a rise in the interest rate.Figure 3e. When a wave of optimism boosts business investment and expands aggregate demand,money demand increases from MD1 to MD2 in Figure 3. The increase in money demand increases the interest rate.Figure 43. a. The increase in the money supply will cause the equilibrium interest rate to decline, asshown in Figure 4. Households will increase spending and will invest in more new housing. Firms too will increase investment spending. This will cause the aggregate demand curve to shift to the right as shown in Figure 5.Price LevelQuantity of Output P 1AD 1AD 2P 2Y 1Y 2Short-run Aggregate SupplyFigure 5b. As shown in Figure 5, the increase in aggregate demand will cause an increase in bothoutput and the price level in the short run.c. When the economy makes the transition from its short-run equilibrium to its long-runequilibrium, short-run aggregate supply will decline, causing the price level to rise even further. d. The increase in the price level will cause an increase in the demand for money, raisingthe equilibrium interest rate.e. Yes. While output initially rises because of the increase in aggregate demand, it will fallonce short-run aggregate supply declines. Thus, there is no long-run effect of the increase in the money supply on real output.Figure 64. A tax cut that is permanent will have a bigger impact on consumer spending and aggregatedemand. If the tax cut is permanent, consumers will view it as adding substantially to their financial resources, and they will increase their spending substantially. If the tax cut istemporary, consumers will view it as adding just a little to their financial resources, so they will not increase spending as much. 5. a. The current situation is shown in Figure 7.Price LevelQuantity of OutputShort-run Aggregate Suppl yAggregate DemandLong-run Aggregate Suppl yFigure 7b. The Fed will want to stimulate aggregate demand. Thus, it will need to lower the interestrate by increasing the money supply. This could be achieved if the Fed purchases government bonds from the public.Figure 8c. As shown in Figure 8, the Fed's purchase of government bonds shifts the supply ofmoney to the right, lowering the interest rate.d. The Fed's purchase of government bonds will increase aggregate demand as consumersand firms respond to lower interest rates. Output and the price level will rise as shown in Figure 9.Figure 96. a. Legislation allowing banks to pay interest on checking deposits increases the return tomoney relative to other financial assets, thus increasing money demand.b. If the money supply remained constant (at MS1), the increase in the demand for moneywould have raised the interest rate, as shown in Figure 10. The rise in the interest ratewould have reduced consumption and investment, thus reducing aggregate demand and output.c. To maintain a constant interest rate, the Fed would need to increase the money supplyfrom MS1 to MS2. Then aggregate demand and output would be unaffected.Figure 107. a. If there is no crowding out, then the multiplier equals 1/(1 – MPC). Because themultiplier is 3, then MPC = 2/3.b. If there is crowding out, then the MPC would be larger than 2/3. An MPC that is largerthan 2/3 would lead to a larger multiplier than 3, which is then reduced down to 3 by the crowding-out effect.8. a. The initial effect of the tax reduction of $20 billion is to increase aggregate demand by$20 billion x 3/4 (the MPC) = $15 billion.b. Additional effects follow this initial effect as the added incomes are spent. The secondround leads to increased consumption spending of $15 billion x 3/4 = $11.25 billion. The third round gives an increase in consumption of $11.25 billion x 3/4 = $8.44 billion. The effects continue indefinitely. Adding them all up gives a total effect that depends on the multiplier. With an MPC of 3/4, the multiplier is 1/(1 – 3/4) = 4. So the total effect is $15 billion x 4 = $60 billion.c. Government purchases have an initial effect of the full $20 billion, because they increaseaggregate demand directly by that amount. The total effect of an increase in government purchases is thus $20 billion x 4 = $80 billion. So government purchases lead to a bigger effect on output than a tax cut does. The difference arises because governmentpurchases affect aggregate demand by the full amount, but a tax cut is partly saved byconsumers, and therefore does not lead to as much of an increase in aggregate demand.d. The government could increase taxes by the same amount it increases its purchases.9. a. If the marginal propensity to consume is 0.8, the spending multiplier will be 1/(1-0.8) =5. Therefore, the government would have to increase spending by $400/5 = $80 billionto close the recessionary gap.b. With an MPC of 0.8, the tax multiplier is (0.8)(1/(1-0.8)) = (0.8)(5) = 4. Therefore, thegovernment would need to cut taxes by $400 billion/4 = $100 billion to close therecessionary gap.c. If the central bank was to hold the money supply constant, my answer would be largerbecause crowding out would occur.d. They would have to raise both government spending and taxes by $400 billion. Theincrease in government purchases would result in a boost of $2,000 billion, while thehigher taxes would reduce spending by $1,600 billion. This leaves a $400 billion rise inaggregate spending.10. If government spending increases, aggregate demand rises, so money demand rises. Theincrease in money demand leads to a rise in the interest rate and thus a decline in aggregate demand if the Fed does not respond. But if the Fed maintains a fixed interest rate, it will increase money supply, so aggregate demand will not decline. Thus, the effect on aggregate demand from an increase in government spending will be larger if the Fed maintains a fixed interest rate.11. a. Expansionary fiscal policy is more likely to lead to a short-run increase in investment ifthe investment accelerator is large. A large investment accelerator means that theincrease in output caused by expansionary fiscal policy will induce a large increase ininvestment. Without a large accelerator, investment might decline because the increase in aggregate demand will raise the interest rate.b. Expansionary fiscal policy is more likely to lead to a short-run increase in investment ifthe interest sensitivity of investment is small. Because fiscal policy increases aggregatedemand, thus increasing money demand and the interest rate, the greater the sensitivity of investment to the interest rate the greater the decline in investment will be, which will offset the positive accelerator effect.12. a. Tax revenue declines when the economy goes into a recession because taxes are closelyrelated to economic activity. In a recession, people's incomes and wages fall, as do firms' profits, so taxes on these things decline.b. Government spending rises when the economy goes into a recession because morepeople get unemployment-insurance benefits, welfare benefits, and other forms ofincome support.c. If the government were to operate under a strict balanced-budget rule, it would have toraise tax rates or cut government spending in a recession. Both would reduce aggregate demand, making the recession more severe.13. a. If there were a contraction in aggregate demand, the Fed would need to increase themoney supply to increase aggregate demand and stabilize the price level, as shown inFigure 11. By increasing the money supply, the Fed is able to shift the aggregate-demand curve back to AD1 from AD2. This policy stabilizes output and the price level.Figure 11b. If there were an adverse shift in short-run aggregate supply, the Fed would need todecrease the money supply to stabilize the price level, shifting the aggregate-demand curve to the left from AD1 to AD2, as shown in Figure 12. This worsens the recession caused by the shift in aggregate supply. To stabilize output, the Fed would need to increase the money supply, shifting the aggregate-demand curve from AD1 to AD3.However, this action would raise the price level.Figure 12。
货币金融学(第十二版)英文版题库及答案chapter 21
Economics of Money, Banking, and Financial Markets, 12e (Mishkin)Chapter 21 The Monetary Policy and Aggregate Demand Curves21.1 The Federal Reserve and Monetary Policy1) Because prices are slow to move in the short-run, when the Federal Reserve lowers the federal funds rateA) nominal interest rates rise.B) real interest rates fall.C) inflation falls.D) real interest rates rise.Answer: BQues Status: Previous EditionAACSB: Analytical Thinking2) Because prices are sticky in the short-run, when the Federal Reserve raises the federal funds rateA) nominal interest rates fall.B) real interest rates rise.C) inflation falls.D) real interest rates fall.Answer: BQues Status: Previous EditionAACSB: Analytical Thinking21.2 The Monetary Policy Curve1) The monetary policy (MP) curve indicates the relationship betweenA) the Federal Funds Rate and the real interest rate.B) the Federal Funds Rate and the inflation rate.C) the inflation rate and the expected inflation rate.D) the real interest rate the central bank sets and the inflation rate.Answer: DQues Status: Previous EditionAACSB: Reflective Thinking2) The upward slope of the MP curve indicates thatA) the central bank lowers real interest rates when inflation rises.B) the central bank raises real interest rates when inflation falls.C) the central bank raises nominal interest rates when inflation rises.D) the central bank raises real interest rates when inflation rises.Answer: DQues Status: Previous EditionAACSB: Reflective Thinking3) The Taylor Principle states that central banks raise nominal rates by ________ than any rise in expected inflation so that real interest rates ________ when there is a rise in inflation.A) less; riseB) more; fallC) less; fallD) more; riseAnswer: DQues Status: Previous EditionAACSB: Reflective Thinking4) An autonomous tightening of monetary policyA) causes an upward movement along the monetary policy curve.B) causes a downward movement along the monetary policy curve.C) shifts the monetary policy curve upward.D) shifts the monetary policy curve downward.Answer: CQues Status: Previous EditionAACSB: Analytical Thinking5) An autonomous easing of monetary policyA) causes an upward movement along the monetary policy curve.B) causes a downward movement along the monetary policy curve.C) shifts the monetary policy curve upward.D) shifts the monetary policy curve downward.Answer: DQues Status: Previous EditionAACSB: Analytical Thinking6) Based on the Taylor Principle, a central bank's endogenous response of raising interest rates when inflation risesA) causes an upward movement along the monetary policy curve.B) causes a downward movement along the monetary policy curve.C) shifts the monetary policy curve upward.D) shifts the monetary policy curve downward.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking7) Based on the Taylor Principle, a central bank's endogenous response of decreasing interest rates when inflation fallsA) causes an upward movement along the monetary policy curve.B) causes a downward movement along the monetary policy curve.C) shifts the monetary policy curve upward.D) shifts the monetary policy curve downward.Answer: BQues Status: Previous EditionAACSB: Analytical Thinking8) Inflationary pressures caused the FOMC to increase the federal funds rate by ¼ of a percentage point in June 2004, and by exactly the same amount at every subsequent FOMC meeting through June of 2006. Theses actionsA) caused an upward movement along the monetary policy curve.B) caused a downward movement along the monetary policy curve.C) shifted the monetary policy curve upward.D) shifted the monetary policy curve downward.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking9) The Fed's policy actions of reacting to higher inflation by raising the real interest rate during 2004-2006 wereA) upward movements along the monetary policy curve.B) downward movement along the monetary policy curve.C) upward shifts of the monetary policy curve.D) downward shifts of the monetary policy curve.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking10) When the financial crisis started in August 2007, inflation was rising and the Fed began an aggressive easing lowering of the federal funds rate, which indicated thatA) the Fed pursued an autonomous monetary policy tightening.B) the Fed pursued an autonomous monetary policy easing.C) the Fed had an automatic negative response to inflation based on the Taylor rule.D) the Fed had an automatic positive response to inflation based on the Taylor rule. Answer: BQues Status: Previous EditionAACSB: Analytical Thinking11) When the financial crisis started in August 2007, inflation was rising and the Fed began an aggressive easing lowering of the federal funds rate, which indicated thatA) there was an upward movement along the monetary policy curve.B) there was a downward movement along the monetary policy curve.C) the monetary policy curve shifted upward.D) the monetary policy curve shifted downward.Answer: DQues Status: Previous EditionAACSB: Analytical Thinking21.3 The Aggregate Demand Curve1) In deriving the aggregate demand curve a ________ inflation rate leads the central bank to________ real interest rates, thereby ________ the level of equilibrium aggregate output.A) higher; raise; loweringB) lower; raise; loweringC) higher; lower; loweringD) higher; lower; raisingAnswer: AQues Status: Previous EditionAACSB: Reflective Thinking2) The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to raise ________ interest rates, thereby ________ the level of equilibrium aggregate output., everything else held constant.A) real; loweringB) real; raisingC) nominal; loweringD) nominal; raisingAnswer: AQues Status: Previous EditionAACSB: Analytical Thinking3) The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to ________ real interest rates, thereby ________ the level of equilibrium aggregate output., everything else held constant.A) raise; loweringB) raise; raisingC) reduce; loweringD) reduce; raisingAnswer: AQues Status: Previous EditionAACSB: Analytical Thinking4) Everything else held constant, an increase in government spending will causeA) aggregate demand to increase.B) aggregate demand to decrease.C) the quantity of aggregate demand to increase.D) the quantity of aggregate demand to decrease.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking5) Everything else held constant, an autonomous easing of monetary policy will causeA) the quantity of aggregate demand to increase.B) the quantity of aggregate demand to decrease.C) aggregate demand to decrease.D) aggregate demand to increase.Answer: DQues Status: Previous EditionAACSB: Analytical Thinking6) Everything else held constant, an autonomous tightening of monetary policy will causeA) the quantity of aggregate demand to increase.B) the quantity of aggregate demand to decrease.C) aggregate demand to increase.D) aggregate demand to decrease.Answer: DQues Status: Previous EditionAACSB: Analytical Thinking7) Everything else held constant, an autonomous easing of monetary policy will causeA) aggregate demand to increase.B) aggregate demand to decrease.C) the quantity of aggregate demand to increase.D) the quantity of aggregate demand to decrease.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking8) Everything else held constant, an increase in autonomous consumer spending will cause the IS curve to shift to the ________ and aggregate demand will ________.A) right; increaseB) right; decreaseC) left; increaseD) left; decreaseAnswer: AQues Status: Previous EditionAACSB: Analytical Thinking9) Everything else held constant, a decrease in autonomous consumer spending will cause the IS curve to shift to the ________ and aggregate demand will ________.A) right; increaseB) right; decreaseC) left; increaseD) left; decreaseAnswer: DQues Status: Previous EditionAACSB: Analytical Thinking10) Everything else held constant, an increase in autonomous planned investment spending will cause the IS curve to shift to the ________ and aggregate demand will ________.A) right; increaseB) right; decreaseC) left; increaseD) left; decreaseAnswer: AQues Status: Previous EditionAACSB: Analytical Thinking11) Everything else held constant, a decrease in autonomous planned investment spending will cause the IS curve to shift to the ________ and aggregate demand will ________.A) right; increaseB) right; decreaseC) left; increaseD) left; decreaseAnswer: DQues Status: Previous EditionAACSB: Analytical Thinking12) Everything else held constant, a decrease in net taxes will cause the IS curve to shift to the ________ and aggregate demand will ________.A) right; increaseB) right; decreaseC) left; increaseD) left; decreaseAnswer: AQues Status: Previous EditionAACSB: Analytical Thinking13) Everything else held constant, an increase in net taxes will cause the IS curve to shift to the ________ and aggregate demand will ________.A) right; increaseB) right; decreaseC) left; increaseD) left; decreaseAnswer: DQues Status: Previous EditionAACSB: Analytical Thinking14) Everything else held constant, an appreciation of the domestic currency will cause the IS curve to shift to the ________ and aggregate demand will ________.A) right; increaseB) right; decreaseC) left; increaseD) left; decreaseAnswer: DQues Status: Previous EditionAACSB: Analytical Thinking15) Everything else held constant, a depreciation of the domestic currency will cause the IS curve to shift to the ________ and aggregate demand will ________.A) right; increaseB) right; decreaseC) left; increaseD) left; decreaseAnswer: AQues Status: Previous EditionAACSB: Analytical Thinking16) Everything else held constant, a decrease in government spending will cause the IS curve to shift to the ________ and aggregate demand will ________.A) right; increaseB) right; decreaseC) left; increaseD) left; decreaseAnswer: DQues Status: Previous EditionAACSB: Analytical Thinking。
曼昆经济学原理课件(下)-宏观部分，北大课件Chapter_34_货币和财政政策对总需求的影响
5
流动性偏好理论 The Theory of Liquidity Preference
凯恩斯发展了流动性偏好理论，以解释决定经 济的利率的因素。 Keynes developed the theory of liquidity preference in order to explain what factors determine the economy’s interest rate. 按照这一理论，利率调整以平衡货币供求。 According to the theory, the interest rate adjusts to balance the supply and demand for money.
6
货币供给 Money Supply
货币供给由中央银行（美国的Fed） 通过以下途径进行控制： The money supply is controlled by the Fed through:
公开市场运作 Open-market operations 改变法定准备金 Changing the reserve requirements 改变贴现率 Changing the discount rate
Aggregate demand
0
Quantity fixed by the Fed
Quantity of Money
0
Y2
3. …提高了均衡利率 which increases the equilibrium interest rate…
4. …这又减少了物品与服务的需求量 which in turn reduces the quantity of goods and services demanded.
第三十四章
新视角研究生英语读说写2课文原文加翻译及课后答案
新视野研究生英语读说写2英语原文加翻译及课后答案1.大学课堂：还有人在听吗？Toward the middle of the semester, Fowkes fell ill and missed a class. When he returned, the professor nodded vaguely and, to Fowkes’s astonishment, began to deliver not the next lecture in the sequence but the one after. Had he, in fact, lectured to an empty hall in the absence of his solitary student? Fowkes thought it perfectly possible.在学期中间，Fowkes 因病缺了一次课。
他回到课堂的时候，教授毫无表情地向他点了点头。
接着令Fowkes大吃一惊的是，教授并没有按照顺序讲下一课，而是讲了后面一课。
难道他真的在他唯一的学生缺席的情况下对着空教室讲了一课？Fowkes认为这太有可能了。
Today American colleges and universities (originally modeled on German ones) are under strong attack from many quarters. Teachers, it is charged, are not doing a good job of teaching, and students are not doing a good job of learning. American businesses and industries suffer from unenterprising, uncreative executives educated not to think for themselves but to mouth outdated truisms the rest of the world has long discarded. College graduates lack both basic skills and general culture. Studies are conducted and reports are issued on the status of higher education, but any changes that result either are largely cosmetic or make a bad situation worse.今天美国的大学（原本是以德国的大学为模型的）受到了各方面的严厉指责。
曼昆经济学原理英文版文案加习题答案30章
曼昆经济学原理英⽂版⽂案加习题答案30章281WHAT’S NEW IN THE SEVENTH EDITION:There are no major changes to this chapter.LEARNING OBJECTIVES:By the end of this chapter, students should understand:why inflation results from rapid growth in the money supply.the meaning of the classical dichotomy and monetary neutrality.why some countries print so much money that they experience hyperinflation.how the nominal interest rate responds to the inflation rate.the various costs that inflation imposes on society.CONTEXT AND PURPOSE:Chapter 17 is the second chapter in a two-chapter sequence dealing with money and prices in the long run. Chapter 16 explained what money is and how the Federal Reserve controls the quantity of money. Chapter 17 establishes the relationship between the rate of growth of money and the inflation rate. The purpose of this chapter is to acquaint students with the causes and costs of inflation. Students will find that, in the long run, there is a strong relationship between the growth rate of money and inflation. Students will also find that there are numerous costs to the economy from high inflation, but that there is not a consensus on the importance of these costs when inflation is moderate.KEY POINTS:The overall level of prices in an economy adjusts to bring money supply and money demand into balance. When the central bank increases the supply of money, it causes the price level to rise. Persistent growth in the quantity of money supplied leads to continuing inflation.MONEY GROWTH ANDINFLATION282?Chapter 17/Money Growth and InflationThe principle of monetary neutrality asserts that changes in the quantity of money influence nominal variables but not real variables. Most economists believe that monetary neutrality approximately describes the behavior of the economy in the long run.A government can pay for some of its spending simply by printing money. When countries rely heavily on this “inflation tax,” the result is hyperinflation.One application of the principle of monetary neutrality is the Fisher effect. According to the Fisher effect, when the inflation rate rises, the nominal interest rate rises by the same amount, so that the real interest rate remains the same.Many people think that inflation makes them poorer because it raises the cost of what they buy. This view is a fallacy, however, because inflation also raises nominal incomes.Economists have identified six costs of inflation: shoeleather costs associated with reduced money holdings, menu costs associated with more frequent adjustment of prices, increased variability of relative prices, unintended changes in tax liabilities due to nonindexation of the tax code, confusion and inconvenience resulting from a changing unit of account, and arbitrary redistributions of wealth between debtors and creditors. Many of these costs are large during hyperinflation, but the size ofthese costs for moderate inflation is less clear.CHAPTER OUTLINE:I. The inflation rate is measured as the percentage change in the Consumer Price Index, the GDPdeflator, or some other index of the overall price level.A. Over the past 80 years, prices have risen on average 3.6% per year in the United States.1. There has been substantial variation in the rate of price changes over time.2. From 2002 to 2012, prices rose at an average rate of 2.5% per year, while prices rose by7.8% per year during the 1970s.B. International data shows an even broader range of inflation experiences. In 2012, inflation was0.1% in Japan, 5.1% in Russia, 9.3% in India, and 21.1% in Venezuela.II. The Classical Theory of InflationChapter 17/Money Growth and Inflation?283A. The Level of Prices and the Value of Money1. When the price level rises, people have to pay more for the goods and services they buy.2. A rise in the price level also means that the value of money is now lower because each dollarnow buys a smaller quantity of goods and services.3. If P is the price level, then the quantity of goods and services that can be purchased with $1 is equal to 1/P.4. Suppose you live in a country with one good (ice cream cones).a. When the price of an ice cream cone is $2, the value of a dollar is 1/2 cone.b. When the price of an ice cream cone rises to $3, the value of a dollar is 1/3 cone.B. Money Supply, Money Demand, and Monetary Equilibrium1. The value of money is determined by the supply and demand for money.2. For the most part, the supply of money is determined by the Fed.3. The demand for money reflects how much wealth people want to hold in liquid form.a. One variable that is very important in determining the demand for money is the price level.b. The higher prices are, the more money that is needed to perform transactions.c. Thus, a higher price level (and a lower value of money) leads to a higher quantity of money demanded.4. In the long run, money supply and money demand are brought into equilibrium by the overall level of prices.a. If the price level is above the equilibrium level, people will want to hold more moneythan is available and prices will have to decline.b. If the price level is below equilibrium, people will want to hold less money than that available and the price level will rise.5. We can show the supply and demand for money using a graph.a. The horizontal axis shows the quantity of money.b. The left-hand vertical axis is the value of money, measured by 1/P.c. The right-hand vertical axis is the price level (P). Note that it is inverted—a high value of money means a low price level and vice versa.284?Chapter 17/Money Growth and Inflationd. The supply curve is vertical because the Fed has fixed the quantity of money available.e. The demand curve for money is downward sloping. When the value of money is low, people demand a larger quantity of it to buy goods and services.f. At the equilibrium, the quantity of money demanded is equal to the quantity of money supplied.C. The Effects of a Monetary Injection1. Assume that the economy is currently in equilibrium and the Fed suddenly increases the supply of money.2. The supply of money shifts to the right.3. The equilibrium value of money falls and the price level rises.4. When an increase in the money supply makes dollars more plentiful, the result is an increasein the price level that makes each dollar less valuable.5. Definition of quantity theory of money: a theory asserting that the quantity ofmoney available determines the price level and that the growth rate in thequantity of money available determines the inflation rate.D. A Brief Look at the Adjustment Process1. The immediate effect of an increase in the money supply is to create an excess supply ofmoney.2. People try to get rid of this excess supply in a variety of ways.a. They may buy goods and services with the excess funds.b. They may use these excess funds to make loans to others by buying bonds or depositingthe money in a bank account. These loans will then be used by others to buy goods andservices.Chapter 17/Money Growth and Inflation ? 285c. In either case, the increase in the money supply leads to an increase in the demand forgoods and services.d. Because the supply of goods and services has not changed, the result of an increase inthe demand for goods and services will be higher prices.E. The Classical Dichotomy and Monetary Neutrality1. In the 18th century, David Hume and other economists wrote about the relationship betweenmonetary changes and important macroeconomic variables such as production, employment, real wages, and real interest rates. 2. They suggested that economic variables should be divided into two groups: nominal variablesand real variables.a. Definition of nominal variables: variables measured in monetary units .b. Definition of real variables: variables measured in physical units .3. Definition of classical dichotomy: the theoretical separation of nominal and realvariables . 4. Prices in the economy are nominal (because they are quoted in units of money), but relativeprices are real (because they are not measured in money terms).5. Classical analysis suggested that different forces influence real and nominal variables.a. Changes in the money supply affect nominal variables but not real variables.b. Definition of monetary neutrality: the proposition that changes in the moneysupply do not affect real variables .F. Velocity and the Quantity Equation1. Definition of velocity of money: the rate at which money changes hands .2. To calculate velocity, we divide nominal GDP by the quantity of money.3. If P is the price level (the GDP deflator), Y is real GDP, and M is the quantity of money:4. Rearranging, we get the quantity equation:286 ? Chapter 17/Money Growth and Inflation5. Definition of quantity equation: the equation M × V = P × Y , which relates thequantity of money, the velocity of money, and the dollar value of the economy’s output of goods and services .a. The quantity equation shows that an increase in the quantity of money must be reflectedin one of the other three variables.b. Specifically, the price level must rise, output must rise, or velocity must fall.c. Figure 3 shows nominal GDP, the quantity of money (as measured by M2) and thevelocity of money for the United States since 1960. It appears that velocity is fairly stable, while nominal GDP and the money supply have grown dramatically.6. We can now explain how an increase in the quantity of money affects the price level usingthe quantity equation.a. The velocity of money is relatively stable over time.b. When the central bank changes the quantity of money (M ), it will proportionately changethe nominal value of output (P × Y ).c. The economy’s output of goods and services (Y ) is determined primarily by availableresources and technology. Because money is neutral, changes in the money supply do not affect output.d. This must mean that P increases proportionately with the change in M .e. Thus, when the central bank increases the money supply rapidly, the result is a high rateof inflation.G. Case Study: Money and Prices during Four Hyperinflations1. Hyperinflation is generally defined as inflation that exceeds 50% per month.ALTERNATIVE CLASSROOM EXAMPLE: Suppose that: Real GDP = $5,000Velocity = 5Money supply = $2,000Price level = 2We can show that: M x V = P x Y$2,000 x 5 = 2 x $5,000$10,000 = $10,000Chapter 17/Money Growth and Inflation ? 2872. Figure 4 shows data from four classic periods of hyperinflation during the 1920s in Austria,Hungary, Germany, and Poland.3. We can see that, in each graph, the quantity of money and the price level are almost parallel.4. These episodes illustrate Principle #9: Prices rise when the government prints too muchmoney.H. The Inflation Tax1. Some countries use money creation to pay for spending instead of using tax revenue.2. Definition of inflation tax: the revenue the government raises by creating money .3. The inflation tax is like a tax on everyone who holds money.4. Almost all hyperinflations follow the same pattern.a. The government has a high level of spending and inadequate tax revenue to pay for itsspending.b. The government’s ability to borrow funds is limited.c. As a result, it turns to printing money to pay for its spending.d. The large increases in the money supply lead to large amounts of inflation.e. The hyperinflation ends when the government cuts its spending and eliminates the needto create new money. 5. FYI: Hyperinflation in Zimbabwea. In the 2000s, Zimbabwe faced one of history’s most extreme examples of hyperinflation.b. Before the period of hyperinflation, one Zimbabwe dollar was worth a bit more than oneU.S. dollar.c. By 2009, the Zimbabwe government was issuing notes with denominations as large as 10 trillion Zimbabwe dollars (which were worth about three U.S. dollars).I. The Fisher Effect1. Recall that the real interest rate is equal to the nominal interest rate minus the inflation rate.2. This, of course, means that:288 ? Chapter 17/Money Growth and Inflationa. The supply and demand for loanable funds determines the real interest rate.b. Growth in the money supply determines the inflation rate.3. When the Fed increases the rate of growth of the money supply, the inflation rate increases. This in turn will lead to an increase in the nominal interest rate.4. Definition of Fisher effect: the one-for-one adjustment of the nominal interest rateto the inflation rate .a. The Fisher effect does not hold in the short run to the extent that inflation is unanticipated.b. If inflation catches borrowers and lenders by surprise, the nominal interest rate will fail to reflect the rise in prices.5. Figure 5 shows the nominal interest rate and the inflation rate in the U.S. economy since 1960.III. The Costs of InflationA. A Fall in Purchasing Power? The Inflation Fallacy1. Most individuals believe that the major problem caused by inflation is that inflation lowers the purchasing power of a person’s income.2. However, as prices rise, so do incomes. Thus, inflation does not in itself reduce the purchasing power of incomes.B. Shoeleather Costs1. Because inflation erodes the value of money that you carry in your pocket, you can avoid this drop in value by holding less money.ALTERNATIVE CLASSROOM EXAMPLE:Real interest rate = 5% Inflation rate = 2%This means that the nominal interest rate will be 5% + 2% = 7%.If the inflation rate rises to 3%, the nominal interest rate will rise to 5% + 3% = 8%.Chapter 17/Money Growth and Inflation?2892. However, holding less money generally means more trips to the bank.3. Definition of shoeleather costs: the resources wasted when inflation encouragespeople to reduce their money holdings.4. This cost can be considerable in countries experiencing hyperinflation.C. Menu Costs1. Definition of menu costs: the costs of changing prices.2. During periods of inflation, firms must change their prices more often.D. Relative-Price Variability and the Misallocation of Resources1. Because prices of most goods change only once in a while (instead of constantly), inflation causes relative prices to vary more than they would otherwise.2. When inflation distorts relative prices, consumer decisions are distorted and markets are less able to allocate resources to their best use.E. Inflation-Induced Tax Distortions1. Lawmakers fail to take inflation into account when they write tax laws.2. The nominal values of interest income and capital gains are taxed (not the real values).a. Table 1 shows a hypothetical example of two individuals, living in two countries earning the same real interest rate, and paying the same tax rate, but one individual lives in a country without inflation and the other lives in a country with 8% inflation.b. The person living in the country with inflation ends up with a smaller after-tax real interest rate.3. This implies that higher inflation will tend to discourage saving.4. A possible solution to this problem would be to index the tax system.290?Chapter 17/Money Growth and InflationF. Confusion and Inconvenience1. Money is the yardstick that we use to measure economic transactions.2. When inflation occurs, the value of money falls. This alters the yardstick that we use to measure important variables like incomes and profit.G. A Special Cost of Unexpected Inflation: Arbitrary Redistributions of Wealth1. Example: Sam Student takes out a $20,000 loan at 7% interest (nominal). In 10 years, the loan will come due. After his debt has compounded for 10 years at 7%, Sam will owe the bank $40,000.2. The real value of this debt will depend on inflation.a. If the economy has a hyperinflation, wages and prices will rise so much that Sam may be able to pay the $40,000 out of pocket change.b. If the economy has deflation, Sam will find the $40,000 a greater burden than he anticipated.3. Because inflation is often hard to predict, it imposes risk on both Sam and the bank that the real value of the debt will differ from that expected when the loan is made.4. Inflation is especially volatile and uncertain when the average rate of inflation is high.H. Inflation Is Bad, but Deflation May Be Worse1. Although inflation has been the norm in recent U.S. history, from 1998 to 2012 Japan experienced a 4-percent decline in its overall price level.2. Deflation leads to lower shoeleather costs, but still creates menu costs and relative-price variability.Chapter 17/Money Growth and Inflation?2913. Deflation also results in the redistribution of wealth toward creditors and away from debtors.I. Case Study: The Wizard of Oz and the Free Silver Debate1. Some scholars believe that the book The Wizard of Oz was written about U.S. monetary policy in the late 19th century.2. From 1880 to 1896, the United States experienced deflation, redistributing wealth from farmers (with outstanding loans) to banks.3. Because the United States followed the gold standard at this time, one possible solution to the problem was to start to use silver as well. This would increase the supply of money, raising the price level, and reduce the real va lue of the farmers’ debts.4. There has been some debate over the interpretation assigned to each character, but it is clear that the story revolves around the monetary policy debate at that time in history.5. Even though those who wanted to use silver were defeated, the money supply in the United States increased in 1898 when gold was discovered in Alaska and supplies of gold were shipped in from Canada and South Africa.6. Within 15 years, prices were back up and the farmers were better able to handle their debts.292?Chapter 17/Money Growth and InflationSOLUTIONS TO TEXT PROBLEMS:Quick Quizzes1. When the government of a country increases the growth rate of the money supply from 5 percent per year to 50 percent per year, the average level of prices will start rising very quickly, as predicted by the quantity theory of money. Nominal interest rates will increase dramatically as well, as predicted by the Fisher effect. The government may be increasing the money supply to finance its expenditures.Chapter 17/Money Growth and Inflation?2932. Six costs of inflation are: (1) shoeleather costs; (2) menu costs; (3) relative-price variability and the misallocation of resources; (4) inflation-induced tax distortions; (5) confusion and inconvenience; and (6) arbitrary redistributions of wealth. Shoeleather costs arise because inflation causes people to spend resources going to the bank more often. Menu costs occur when people spend resources changing their posted prices. Relative-price variability occurs because as general prices rise, a fixed dollar price translates into a declining relative price, so the relative prices of goods are constantly changing, causing a misallocation of resources. The combination of inflation and taxation causes distortions in incentives because people are taxed on their nominal capital gains and interest income instead of their real income fromthese sources. Inflation causes confusion and inconvenience because it reduces money’s ability to function as a unit of account. Unexpected inflation redistributes wealth between borrowers and lenders.Questions for Review1. An increase in the price level reduces the real value of money because each dollar in your wallet now buys a smaller quantity of goods and services.2. According to the quantity theory of money, an increase in the quantity of money causes a proportional increase in the price level.3. Nominal variables are those measured in monetary units, while real variables are those measured in physical units. Examples of nominal variables include the prices of goods and nominal GDP. Examples of real variables include relative prices (the price of one good in terms of another), and real wages. According to the principle of monetary neutrality, only nominal variables are affected by changes in the quantity of money.4. Inflation is like a tax because everyone who holds money loses purchasing power. In a hyperinflation, the government increases the money supply rapidly, which leads to a high rate of inflation. Thus the government uses the inflation tax, instead of taxes, to finance its spending.5. According to the Fisher effect, an increase in the inflation rate raises the nominal interest rate by the same amount that the inflation rate increases, with no effect on the real interest rate.6. The costs of inflation include shoeleather costs associated with reduced money holdings, menu costs associated with more frequent adjustment of prices, increased variability of relative prices, unintended changes in tax liabilities due to nonindexation of the tax code, confusion and inconvenience resulting from a changing unit of account, and arbitrary redistributions of wealth between debtors and creditors. With a low and stable rate of inflation like that in the United States, none of these costs are very high. Perhaps the most important one is the interaction between inflation and the tax code, which may reduce saving and investment even though the inflation rate is low.7. If inflation is less than expected, creditors benefit and debtors lose. Creditors receive dollar payments from debtors that have a higher real value than was expected.294?Chapter 17/Money Growth and InflationQuick Check Multiple Choice1. d2. d3. b4. b5. a6. dProblems and Applications1. In this problem, all amounts are shown in billions.a. Nominal GDP = P ×Y = $10,000 and Y = real GDP = $5,000, so P = (P ×Y)/Y =$10,000/$5,000 = 2.Because M ×V = P ×Y, then V = (P ×Y)/M = $10,000/$500 = 20.b. If M and V are unchanged and Y rises by 5%, then because M ×V = P ×Y, P must fallby 5%. As a result, nominal GDP is unchanged.c. To keep the price level stable, the Fed must increase the money supply by 5%, matching the increase in real GDP. Then, because velocity is unchanged, the price level will be stable.d. If the Fed wants inflation to be 10%, it will need to increase the money supply 15%.Thus M ×V will rise 15%, causing P ×Y to rise 15%, with a 10% increase in prices anda 5% rise in real GDP.2. a. If people need to hold less cash, the demand for money shifts to the left, because there will be less money demanded at any price level.b. If the Fed does not respond to this event, the shift to the left of the demand for money combined with no change in the supply of money leads to a decline in the value ofmoney (1/P), which means the price level rises, as shown in Figure 1.Figure 1Chapter 17/Money Growth and Inflation?295c. If the Fed wants to keep the price level stable, it should reduce the money supply fromS1 to S2 in Figure 2. This would cause the supply of money to shift to the left by thesame amount that the demand for money shifted, resulting in no change in the value ofmoney and the price level.Figure 23. With constant velocity, reducing the inflation rate to zero would require the money growthrate to equal the growth rate of output, according to the quantity theory of money (M ×V = P ×Y).4. If a country's inflation rate increases sharply, the inflation tax on holders of money increasessignificantly. Wealth in savings accounts is not subject to a change in the inflation taxbecause the nominal interest rate will increase with the rise in inflation. But holders ofsavings accounts are hurt by the increase in the inflation rate because they are taxed ontheir nominal interest income, so their real returns are lower.5. a. When the price of both goods doubles in a ye ar, inflation is 100%. Let’s set the marketbasket equal to one unit of each good. The cost of the market basket is initially $4 andbecomes $8 in the second year. Thus, the rate of inflation is ($8 – $4)/$4 × 100 = 100%.Because the prices of all goods rise by 100%, the farmers get a 100% increase in theirincomes to go along with the 100% increase in prices, so neither is affected by thechange in prices.b. If the price of beans rises to $2 and the price of rice rises to $4, then the cost of themarket basket in the second year is $6. This means that the inflation rate is ($6 – $4)/$4 × 100 = 50%. Bob is better off because his dollar revenues doubled (increased 100%)while inflation was only 50%. Rita is worse off because inflation was 50% percent, so the price of the good she buys rose faster than the price of the good (rice) she sells, whichrose only 33%.c. If the price of beans rises to $2 and the price of rice falls to $1.50, then the cost of themarket basket in the second year is $3.50. This means that the inflation rate is ($3.5 –$4)/$4 × 100 = -12.5%. Bob is better off because his dollar revenues doubled (increased 100%) while prices overall fell 12.5%. Rita is worse off because inflation was -12.5%, so the price of the good she buys didn't fall as fast as the price of the good (rice) she sells,which fell 50%.296?Chapter 17/Money Growth and Inflationd. The relative price of rice and beans matters more to Bob and Rita than the overallinflation rate. If the price of the good that a person produces rises more than inflation,he will be better off. If the price of the good a person produces rises less than inflation,he will be worse off.6. The following table shows the relevant calculations:Row (3) is row (1) minus row (2). Row (4) is 0.40 × row (1). Row (5) is (1 – .40) × row (1),which equals row (1) minus row (4). Row (6) is row (5) minus row (2). Note that eventhough part (a) has the highest before-tax real interest rate, it has the lowest after-tax realinterest rate. Note also that the after-tax real interest rate is much lower than the before-taxreal interest rate.7. The functions of money are to serve as a medium of exchange, a unit of account, and a storeof value. Inflation mainly affects the ability of money to serve as a store of value, becauseinflation erodes money's purchasing power, making it less attractive as a store of value.Money also is not as useful as a unit of account when there is inflation, because stores haveto change prices more often and because people are confused and inconvenienced by thechanges in the value of money. In some countries with hyperinflation, stores post prices interms of a more stable currency, such as the U.S. dollar, even when the local currency is stillused as the medium of exchange. Sometimes countries even stop using their local currencyaltogether and use a foreign currency as the medium of exchange as well.8. a. Unexpectedly high inflation helps the government by providing higher tax revenue andreducing the real value of outstanding government debt.b. Unexpectedly high inflation helps a homeowner with a fixed-rate mortgage because hepays a fixed nominal interest rate that was based on expected inflation, and thus pays alower real interest rate than was expected.c. Unexpectedly high inflation hurts a union worker in the second year of a labor contractbecause the contract probably based the worker's nominal wage on the expectedinflation rate. As a result, the worker receives a lower-than-expected real wage.d. Unexpectedly high inflation hurts a college that has invested some of its endowment ingovernment bonds because the higher inflation rate means the college is receiving alower real interest rate than it had planned. (This assumes that the college did notpurchase indexed Treasury bonds.)9. a. The statement that "Inflation hurts borrowers and helps lenders, because borrowersmust pay a higher rate of interest," is false. Higher expected inflation means borrowerspay a higher nominal rate of interest, but it is the same real rate of interest, soborrowers are not worse off and lenders are not better off. Higher unexpected inflation,on the other hand, makes borrowers better off and lenders worse off.Chapter 17/Money Growth and Inflation?297 b. The statement, "If prices change in a way that leaves the overall price level unchanged,then no one is made better or worse off," is false. Changes in relative prices can make some people better off and others worse off, even though the overall price level does not change. See problem 6 for an illustration of this.c. The statement, "Inflation does not reduce the purchasing power of most workers," istrue. Most workers' incomes keep up with inflation reasonably well.。
国外经济学论文题目大全
国外经济学论文题目大全1. The Impact of Foreign Direct Investment on Economic Growth2. The Role of International Trade in Promoting Economic Development3. The Effects of Exchange Rate Fluctuations on International Trade4. Economic Integration and its Implications for Global Markets5. The Relationship Between Inflation and Unemployment in Developed Economies6. The Influence of Government Fiscal Policy on Economic Stability7. The Role of Entrepreneurship in Economic Development8. The Impact of Technological Innovation on Economic Growth9. Income Inequality and its Effects on Economic Prosperity10. The Economics of Climate Change and Sustainable Development11. The Role of Financial Markets in Economic Stability12. The Influence of Globalization on Developing Economies13. The Economics of Healthcare and its Impact on the Economy14. The Relationship Between Education and Economic Growth15. The Economics of Aging Population and its Implications for Society16. The Economics of Urbanization and its Impact on Regional Development17. The Role of Government Regulation in Promoting Market Efficiency18. The Effects of Corporate Social Responsibility on Business Performance19. The Economics of Natural Resources and Environmental Sustainability20. The Impact of Global Economic Crises on National Economies21. The Role of Monetary Policy in Controlling Inflation22. The Economics of Migration and its Influence on Labor Markets23. The Relationship between Economic Freedom and Economic Growth24. The Impact of Consumer Behavior on Market Demand25. The Role of Infrastructure Investment in Economic Development26. The Economics of Poverty and its Implications for Social Welfare27. The Influence of Cultural Factors on Economic Development28. The Role of Foreign Aid in Promoting Economic Development29. The Economics of International Debt and its Impact on Developing Economies30. The Relationship Between Government Debt and Economic GrowthEconomic theories and policies are crucial in understanding and promoting sustainable economic development. These diverse topics in economic study cover a wide range of issues that are vital for policymakers, economists, and researchers. The understanding of these issues contributes to a better grasp of the complexities of economic systems and aids in the formulation of effective strategies for economic growth and stability. As such, continued research and analysis in these areas are essential for the advancement of our knowledge and the improvement of our economies.。
我的专业方向英语作文
我的专业方向英语作文英文回答：In the realm of specialization, it is imperative to discern the myriad of factors that influence the selection of one's professional path. The choice is not merely a matter of following in the footsteps of societal expectations or succumbing to the allure of monetary rewards. Rather, it entails a profound introspection, an exploration of one's passions, values, and aspirations.Upon embarking on this journey of self-discovery, it becomes evident that personal interests play a paramount role in shaping our professional inclinations. Curiosity and passion serve as guiding lights, illuminating the paths that align with our inherent desires. When we engage in activities that genuinely captivate us, we experience a sense of fulfillment and purpose that transcends monetary compensation.However, it would be remiss to disregard the influence of external factors on our professional choices. Societal norms, parental expectations, and the allure of lucrative careers can sometimes overshadow our true calling. It is essential to navigate these external pressures with a critical eye, discerning between those that align with our values and those that may lead us astray.Ultimately, the decision of which professional direction to pursue is a deeply personal one. There is no right or wrong answer, as the best path is the one that resonates most profoundly with who we are and what we aspire to become. By embracing our passions, considering external factors with mindfulness, and trusting our intuition, we can find a profession that not only provides a livelihood but also brings us a sense of fulfillment and meaning.中文回答：在专业方向的选择上，影响因素众多，需要认真考虑。
everyhashisprice英语作文
everyhashisprice英语作文EveryhashispriceIn the ever-evolving landscape of our modern world, the concept of "everything has its price" has become increasingly prevalent. This notion, often used to describe the commercialization and monetization of various aspects of our lives, has far-reaching implications that extend beyond the surface-level understanding of its simplistic phrase.At the heart of this concept lies the recognition that in our current economic system, virtually nothing is immune to the influence of financial considerations. From the basic necessities of life, such as food, water, and shelter, to the more intangible realms of knowledge, experiences, and even personal relationships, the pervasive grip of monetary value seems to pervade every facet of our existence.One need only look at the commodification of education to see the tangible manifestation of this phenomenon. The rising costs of tuition, textbooks, and other educational resources have placed a significant financial burden on individuals and families, often deterring access to quality education for those from lowersocioeconomic backgrounds. This, in turn, perpetuates a cycle of inequality, where the acquisition of knowledge and the opportunities it provides become inextricably linked to one's ability to afford them.Similarly, the healthcare industry, which should be a bastion of compassion and universal care, has become increasingly commercialized, with the cost of medical treatments and insurance premiums soaring beyond the reach of many. The unfortunate reality is that in a world where "everything has its price," the most vulnerable members of society are often the ones who suffer the consequences of this imbalance, as their ability to access essential healthcare services is compromised by their financial limitations.Even the realm of personal relationships has not been spared from the influence of monetary considerations. The rise of online dating platforms and the proliferation of "sugar daddy" arrangements have introduced a new dynamic where the pursuit of romantic connections is often intertwined with the exchange of financial resources. While these arrangements may provide mutual benefits for some, they also raise questions about the authenticity and sustainability of such relationships, as the underlying motivations may be skewed towards financial gain rather than genuine emotional connections.Furthermore, the commodification of leisure and experiences hastransformed the way we engage with the world around us. The tourism industry, for instance, has evolved into a vast, profit-driven enterprise, where the authentic cultural experiences of local communities are often commodified and packaged for consumption by wealthy travelers. This has led to the displacement of indigenous populations, the erosion of traditional practices, and the homogenization of cultural diversity, all in the name of generating financial returns.Even the realm of personal expression and creativity has not been spared from the influence of monetary considerations. The rise of social media platforms and the increasing emphasis on monetizing digital content have created a landscape where the value of an individual's creative output is often judged by its ability to generate revenue, rather than its intrinsic artistic merit or its ability to inspire and enrich the lives of others.In this context, the phrase "everything has its price" serves as a poignant reminder of the pervasive nature of capitalism and the ways in which it has infiltrated and reshaped the very fabric of our society. It challenges us to confront the ethical and moral implications of a system that prioritizes financial gain over the well-being of individuals and communities, and to consider the long-term consequences of this mindset on the future of our world.Ultimately, the notion that "everything has its price" is a complex and multifaceted issue that requires a nuanced understanding of the social, economic, and cultural forces that have contributed to its emergence. As we navigate the complexities of this reality, it is crucial that we engage in critical discourse, challenge the status quo, and seek to create a more equitable and sustainable world where the inherent worth of individuals, communities, and the environment is not solely defined by its monetary value.。
欧美对欧元的影响英语作文
Growing up in an era where globalization is a buzzword, I have always been fascinated by the interconnectedness of economies and the role of currencies in shaping the worlds financial landscape. One such currency that has captured my attention is the Euro, and the profound influence that Europe and America have had on its value and stability.The Euro, introduced in 1999, is the official currency of the 19 Eurozone countries. Its not just a currency but a symbol of European unity and economic integration. However, its journey has not been without challenges, and the influence of the United States and other European nations has been significant.The United States, with its strong economy and the dominant global currency, the US Dollar, has always had a say in the worlds financial matters. The Euros introduction was seen as a challenge to the Dollars supremacy, and the US has had a complex relationship with the Euro ever since. The US has often influenced the Euro through its monetary policies and economic strategies. For instance, when the Federal Reserve adjusts interest rates, it can cause fluctuations in the Euros value against the Dollar. This is because investors may shift their assets between the two currencies based on the perceived benefits of each.Moreover, the US has a significant impact on the Euro through its trade policies. The US is one of the largest trading partners of the Eurozone, and any trade disputes or agreements can affect the Euros stability. For example, tariffs imposed by the US on European goods can lead to a decrease in the Euros value as it may reduce the demand for the currencyin international trade.On the European front, the Euros influence is a doubleedged sword. While the currency has brought economic benefits to the member countries by facilitating trade and reducing transaction costs, it has also exposed them to shared risks. The 2008 financial crisis and the subsequent Eurozone crisis were testaments to this. The crisis highlighted the flaws in the Euros structure, where a single monetary policy was applied to economies with diverse strengths and weaknesses. Countries like Greece, Spain, and Ireland faced severe economic downturns, and the Euros value plummeted as a result.The European Central Bank ECB has played a crucial role in managing the Euros stability. Through measures like quantitative easing and setting interest rates, the ECB has tried to maintain the Euros value and stimulate economic growth in the Eurozone. However, these measures have also had their critics, who argue that they may lead to inflation and debt accumulation in the long run.As a high school student, I have observed the Euros journey with keen interest. I have learned that the Euro is not just a currency but a complex financial instrument influenced by various factors. The US and Europes influence on the Euro has been significant, shaping its value and stability in different ways.In conclusion, the Euros story is a fascinating one, filled with challenges and triumphs. The influence of the US and Europe on the Euro has beenprofound, highlighting the interconnected nature of our global economy. As we move forward, it will be interesting to see how the Euro evolves and continues to shape the worlds financial landscape.。
宏观经济学货币与财政政策对总需求的影响
• 如果人们偏好强，愿意持有的货币数量就增加， 当货币的需求大于供给时，利率上升；反之，偏 好弱时，对会的需求下降，利率下降。
精选ppt
9
• 流动性偏好：是指人们宁愿持有流动性高但不能生利的货 币，也不愿意持有其他虽然能生利但较难变现的资产的心 理，其实质就是人们对货币的需求，我们可以把流动性偏 好理解为对货币的一种心理偏好。
• Higher money demand leads to a higher interest rate.
• The quantity of goods and services
demanded falls. 精选ppt
24
21.1.2 总需求曲线向定因素。 • 较高的物价水平增加了任何一种既定利
Money supply
r1 Equilibrium
interest rate r2
0
Money demand
Md
Quantity fixed
M2d
Quantity of
by the Fed
Money
利率
r1 均衡 利率
r2 0
图1. 货币市场的均衡
货币供给
货币需求
Md
M2d
美联储固定的量
货币量
21.1.2 The Downward Slope of the Aggregate Demand Curve
• The price level is one determinant of the quantity of money demanded.
• A higher price level increases the quantity of money demanded for any given interest rate.
英语六级阅读 20ths and 21ths
英语六级阅读20ths and 21ths全文共3篇示例，供读者参考篇1The 20th and 21st centuries have seen significant advancements and changes in various aspects of society, culture, technology, and politics. These two centuries have witnessed a transformation in the way people live, communicate, and interact with each other.One of the most significant developments of the 20th century was the advent of the internet and digital technology. The internet revolutionized the way people access information, communicate with one another, and conduct business. It opened up new possibilities for learning, entertainment, and socializing. With the rise of social media platforms, people could connect with others from all over the world and share their opinions, ideas, and experiences.In the field of science and technology, the 20th century saw extraordinary progress with the development of new inventions such as the airplane, the television, and the computer. These innovations reshaped the way people worked, traveled, andentertained themselves. The 21st century continued this trend with the rise of smartphones, social media, and artificial intelligence. These advancements further transformed the way people interact with technology and the world around them.The 20th and 21st centuries also witnessed significant changes in politics and society. The 20th century was marked by two world wars, the rise and fall of empires, and the struggle for civil rights and equality. The 21st century has seen the rise of new global challenges such as climate change, terrorism, and cyber warfare. These challenges require cooperation and innovation on a global scale to address them effectively.Culturally, the 20th and 21st centuries have seen a proliferation of diverse artistic expressions in music, literature, film, and visual arts. From the avant-garde movements of the early 20th century to the digital art forms of the 21st century, artists have continuously pushed the boundaries of creativity and expression.In conclusion, the 20th and 21st centuries have been characterized by rapid technological advancements, social and political changes, and cultural innovations. These two centuries have reshaped the way people live, work, and interact with eachother, creating a world that is more interconnected, diverse, and dynamic than ever before.篇2The 20th and 21st centuries have been marked by significant advancements and changes in various aspects of society, technology, and culture. From the industrial revolution to the digital age, these two centuries have witnessed groundbreaking developments that have reshaped the way we live, work, and interact with one another.In the 20th century, the world went through two devastating world wars that left a lasting impact on global politics and economics. The invention of the internet revolutionized communication and connectivity, making it easier for people to stay connected across the globe. The emergence of new technologies like television, automobiles, and airplanes transformed the way we live, work, and travel.In the 21st century, technology continued to advance at a rapid pace, with the rise of smartphones, social media, and artificial intelligence changing the way we communicate and access information. The global economy became more interconnected through the growth of multinationalcorporations and international trade agreements. Climate change became a pressing issue, leading to increased awareness and activism around environmental sustainability.Cultural trends also evolved in the 20th and 21st centuries, with changes in fashion, music, art, and entertainment reflecting the shifting values and beliefs of society. The Civil Rights Movement in the 1960s and the #MeToo movement in the 2010s highlighted the ongoing struggle for equality and social justice. Pop culture icons like the Beatles, Madonna, and Beyoncé captured the hearts of millions and influenced generations of fans.Overall, the 20th and 21st centuries have been a time of tremendous change and progress, with advancements in technology, politics, and culture shaping the world we live in today. As we move forward into the future, it is important to reflect on the lessons of the past and continue striving towards a more inclusive, sustainable, and prosperous society for all.篇3Today, we are going to discuss the topic of English 6th grade reading material, specifically focusing on 20th and 21st-century literature. The 20th and 21st centuries have been significantperiods in English literature, with a range of authors and works that have shaped the way we understand the world.One of the key features of 20th-century literature is the move towards modernism, a literary movement that rejected traditional forms and styles in favor of experimentation and innovation. Authors such as James Joyce, Virginia Woolf, and T.S. Eliot were at the forefront of this movement, producing works that challenged the conventions of storytelling and pushed the boundaries of language.In the 21st century, we have seen a shift towards postmodernism, a movement that builds on the ideas of modernism but also incorporates elements of irony, pastiche, and fragmentation. Authors such as Zadie Smith, David Foster Wallace, and Jennifer Egan have embraced this style, producing works that blur the boundaries between fiction and reality and challenge readers to think in new ways.One of the key themes that runs through much of 20th and 21st-century literature is the idea of identity and self-discovery. Many authors explore the ways in which individuals navigate a complex and rapidly changing world, grappling with questions of who they are and where they belong. This theme is particularly prevalent in works such as Sylvia Plath's "The Bell Jar," whichfollows a young woman's struggle with mental illness and societal expectations, and Chimamanda Ngozi Adichie's "Americanah," which explores issues of race, immigration, and cultural identity.Overall, the literature of the 20th and 21st centuries is diverse and rich, offering readers a wide range of styles, themes, and perspectives to explore. Whether you enjoy the experimental prose of modernist writers or the playful postmodern narratives of contemporary authors, there is sure to be something to pique your interest in the literature of these two centuries. So, grab a book, settle in, and prepare to be transported to new worlds and new ways of thinking.。
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Aggregate Demand
When desired spending changes, aggregate demand shifts, causing short-run fluctuations in output and employment. Monetary and fiscal policy are sometimes used to offset those shifts and stabilize the economy.
Money Demand
The opportunity cost of holding money is the interest that could be earned on interest-earning assets. An increase in the interest rate raises the opportunity cost of holding money. As a result, the quantity of money demanded is reduced.
How Monetary Policy Influences Aggregate Demand
The aggregate demand curve slopes downward for three reasons:
The wealth effect The interest-rate effect The exchange-rate effect
How Monetary Policy Influences Aggregate Demand
For the U.S. economy, the most important reason for the downward slope of the aggregate-demand curve is the interest-rate effect.
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KEY CONCEPTS
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Crowding-out effect Theory of liquidity preference Automatic stabilizers
Multiplier effect
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Learn the theory of liquidity preference as a short-run theory of the interest rate analyze how monetary policy affects interest rates and aggregate demand analyze how fiscal policy affects interest rates and aggregate demand discuss the debate over whether policymakers should try to stabilize the economy reconsider how the economy behaves differently in the long run
r2
d M1
Money demand Quantity fixed by the Fed
d M2
0
Quantity of Money
The Downward Slope of the Aggregate Demand Curve
The price level is one determinant of the quantity of money demanded. A higher price level increases the quantity of money demanded for any given interest rate. Higher money demand leads to a higher interest rate. The quantity of goods and services demanded falls.
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
Equilibrium in the Money Market...
Interest Rate Money supply
r1
Equilibrium interest rate
The Influence of Monetary and Fiscal Policy on Aggregate Demand
Chapter 21
CHAPTER 21 THE INFLUENCE OF MONETARY AND FISCAL POLICY ON AGGREGATE DEMAND
IN THIS CHAPtems and derived items copyright © 2001 by Harcourt, Inc.
A Monetary Injection...
(a) The Money Market Interest Rate
Money supply, MS1
(b) The Aggregate-Demand Curve Price Level
Because it is fixed by the Fed, the quantity of money supplied does not depend on the interest rate. The fixed money supply is represented by a vertical supply curve.
The Theory of Liquidity Preference
Keynes developed the theory of liquidity preference in order to explain what factors determine the economy’s interest rate. According to the theory, the interest rate adjusts to balance the supply and demand for money.
Equilibrium in the Money Market
Assume the following about the economy: The price level is stuck at some level. For any given price level, the interest rate adjusts to balance the supply and demand for money. The level of output responds to the aggregate demand for goods and services.
0
Quantity fixed by the Fed
Quantity of Money
0
Y2
Y1 Quantity of Output
3. …which increases the equilibrium equilibrium rate…
4. …which in turn reduces the quantity of goods and services demanded.
The Downward Slope of the Aggregate Demand Curve
The end result of this analysis is a negative relationship between the price level and the quantity of goods and services demanded.
Equilibrium in the Money Market
According to the theory of liquidity preference:
The interest rate adjusts to balance the supply and demand for money. There is one interest rate, called the equilibrium interest rate, at which the quantity of money demanded equals the quantity of money supplied.
r2 r1
2. …increases the demand for money…
1. An increase in the price level…
P2 Aggregate demand
Money demand at price level P2, MD2
P1
Money demand at price level P1, MD1
Money Demand
Money demand is determined by several factors. According to the theory of liquidity preference, one of the most important factors is the interest rate.
Money Supply
The money supply is controlled by the Fed through:
Open-market operations Changing the reserve requirements Changing the discount rate
Money Supply
Changes in the Money Supply
The Fed can shift the aggregate demand curve when it changes monetary policy. An increase in the money supply shifts the money supply curve to the right. Without a change in the money demand curve, the interest rate falls. Falling interest rates increase the quantity of goods and services demanded.