Julian Lake - What is the impact of...?

Skluzavka: 1
Fiscal Policy Tools and Their Impact on Inflation
Government SpendingIf the government decreases their spending, this leads to a decrease in aggregate demand and inflationary pressure
Increase in TaxesIf the government increases taxes, this leads to a decrease in disposable income, consumption, and demand
Skluzavka: 2
Monetary Policy Tools (Federal Reserve) and Their Impact on Inflation
Open Market Operations (OMO)If the Federal Reserve sells government bonds, this leads to a decrease in money supply, an increase in interest rates, and a decrease in spending
Discount RateIf the Federal Reserve raises the discount rate, this leads to less lending to banks, which then leads to a decrease in spending
Reserve RequirementIf the Federal Reserve increases the reserve requirement, this leads to an increase in money held by banks and a decrease in lending
Skluzavka: 3
Impact of Monetary Policy on Loanable Funds and AD/AS
Money SupplyA decrease in the money supply leads to an increase in interest rates. This also leads to the supply of loanable funds shifting left on an AD/AS graph.
Interest RatesAn increase in interest rates leads to a decrease in investment and consumption. This will leads to aggregate demand shifting left on an AD/AS graph.
Monetary policy is more effective than fiscal policy because it is able to tackle inflation faster and can directly affect interest rates.

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