《bank,money课件》HO_MB2e_ch18.pptVIP

* * * * Notes: The discussion of the IS curve has left it something of a mystery as to why it is labeled IS. In a closed economy, in equilibrium, Y = C + I + G. Then Y - C - G = I. or S = I. * * Teaching Tips: The discussion about the complications involved in fighting the recession of 2007–2009 help to explain the difference between a typical recession and one caused by a financial crisis. Encourage students to discuss the role and effectiveness of monetary policy in response to a financial crisis such as that in 2007–2009. One conclusion is that, though monetary policy has an effect, it may be less evident than in a more typical recession due to high risk premiums. * * * * * Teaching Tips: Solved Problems 18.3 shows students how to use the IS-MP model, step-by-step, to analyze the effects of monetary policy. Many times, students seek to memorize models or skip steps when using models. Encourage students to review the material to better understand the behavior of each component of the model: specifically, how monetary policy directly affects the MP curve, the resulting impact on GDP and then the Phillips curve. Taking a step-by-step approach helps students understand the economics underlying the model. * * * * * A monetary contraction decreases banks’ ability to lend, and decreases in loans to bank-dependent borrowers reduce their spending. * * * Notes: Most economists believe that accepting the bank lending or balance sheet channel does not require rejecting the interest rate channel’s implication that monetary policy works through interest rates. Instead, the bank lending and balance sheet channels offer additional methods by which the financial system and monetary policy can affect the economy. * Notes: To derive the LM curve, we use the market for money model from Chapter 17. In that chapter, we assumed that equilibrium in the market for money determined the short-term nominal interest rate. Because equilibrium in the goods market, as shown by the IS cur