宏观经济政策实践幻灯片.pptVIP

* * The point of all this algebra is to express the money supply in terms of the 3 exogenous variables described on the preceding slide. * * Solution: 1. An increase in cr causes the money multiplier and therefore M itself to fall. An increase in cr raises both the numerator and denominator of the expression for m. But since rr 1, the denominator is smaller than the numerator, so a given increase in cr will increase the denominator proportionally more than the numerator, causing a decrease in m. If your students know calculus, they can use the quotient rule to find (dm/dcr) 0. 2. If households deposit less of their money, then banks can’t make as many loans, so the banking system won’t be able to “create” as much money. The following slide shows the solution. * * * Why it’s called “open market operations”: The “operations” are the buying and selling. The market in which U.S. Treasury bonds are traded is “open” in the sense that anyone---you, me, the Fed---can buy or sell in this market. * * * Why not reserve requirements?Making them too low creates a risk of bank runs. Making them too high makes banking unprofitable. In addition, banking would be difficult if the Fed changed reserve requirements frequently. * * * * This graph shows that the growth of real GDP has been very volatile. Question 1 asks whether policymakers should attempt to smooth out these fluctuations by using fiscal and monetary policy to alter aggregate demand. * * Opponents of policy activism argue that long variable lags hinder the effectiveness of policy. Fiscal policy, a change in government spending and/or taxes, requires an act of Congress. As your students may be aware, the process by which a bill becomes a law is lengthy and involved, and often fraught with political difficulty. Monetary policy has a much shorter inside lag. However, firms make their investment plans in advance, so it takes time for changes in interest rates to affect investment