inflation project

Glida: 1
I think I am starting to understand! I only have a few more questions. Is fiscal or monetary more effective?
Monetary is usually more effective than fiscal for decreasing inflation because it is faster, more flexible, and it can target spending and borrowing easier. Fiscal requires political approval which monetary does not. Also making changes to monetary policies is much easier than making changes to the fiscal ones.
Glida: 2
You are amazing! I only have two more questions and then I will stop bugging you. What is the impact of the tools on the loanable funds market?
If the Fed uses OMO to fight inflation then the supply of loanable funds decreases like we talked about earlier. They will have less money to lend to other banks. Intrest rates also increase since there are less loans so the higher intrest rates discourage borrowing and less and less people take out loands for spending or investment.
Glida: 3
I think I am finally starting to understand! Okay this is my last question. What is the impact of loanable funds on aggregate supply and demand?
The intrest rates will increase, but investment and consumption will decrease. If you are using a graph then the AD line will move left because of the reduce of aggregate demand. Real GDP also decrease and so does price levels. So using loanable funds market will reduce aggregate demand which in the end helps reduce inflation.

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