宏觀經(jīng)濟(jì)學(xué)課件Chapter_11

1、11-111-2chapter 11monetary and fiscal policy item item item etc.mcgraw-hill/irwinmacroeconomics, 10e 2008 the mcgraw-hill companies, inc., all rights reserved.11-3introductionin this chapter we use the is-lm model developed in chapter 10 to show how monetary and fiscal policy workfiscal policy has i

2、ts initial impact in the goods marketmonetary policy has its initial impact mainly in the assets marketsbecause the goods and assets markets are interconnected, both fiscal and monetary policies have effects on both the level of output and interest ratesexpansionary/contractionary monetary policy mo

3、ves the lm curve to the right/leftexpansionary/contractionary fiscal policy moves the is curve to the right/left11-4monetary policythe federal reserve is responsible for monetary policy in the u.s. conducted mainly through open market operationsopen market operations: buying and selling of governmen

4、t bondsfed buys bonds in exchange for money increases the stock of money (fig. 11-3)fed sells bonds in exchange for money paid by purchasers of the bonds reducing the money stockinsert figure 11-3 here11-5monetary policyconsider the process of adjustment to the monetary expansionat the initial equil

5、ibrium, e, the increase in money supply creates an excess supply of moneythe public adjusts by trying to buy other assets asset prices increase, and yields decrease move to point e1money market clears, with lower interest ratedecline in interest rate results in excess demand for goodsoutput expands

6、and move up lm schedulefinal position is at einsert figure 11-3 here, again11-6transition mechanismtwo steps in the transmission mechanism (the process by which changes in monetary policy affect ad):1.an increase in real balances generates a portfolio disequilibriumat the prevailing interest rate an

7、d level of income, people are holding more money than they wantportfolio holders attempt to reduce their money holdings by buying other assets changes asset prices and yields the change in money supply changes interest rates2.a change in interest rates affects adinsert table 11-1 here11-7the liquidi

8、ty traptwo extreme cases arise when discussing the effects of monetary policy on the economy first is the liquidity trapliquidity trap = a situation in which the public is prepared, at a given interest rate, to hold whatever amount of money is suppliedimplies the lm curve is horizontal changes in th

9、e quantity of money do not shift itmonetary policy has no impact on either the interest rate or the level of income monetary policy is powerless possibility of a liquidity trap at low interest rates is a notion that grew out of the theories of english economist john maynard keynes11-8banks reluctanc

10、e to lendtwo extreme cases arise when discussing the effects of monetary policy on the economy second is the reluctance of banks to lendanother situation in which monetary policy is powerless to alter the economy break down in the transmission mechanismdespite lower interest rates and increased dema

11、nd for investment, banks may be unwilling to make the loans necessary for the investment purchasesif banks made prior bad loans that are not repaid, may become reluctant to make more, despite demand prefer instead to lend to the government (safer)11-9the classical casethe opposite of the horizontal

12、lm curve (implies that monetary policy cannot affect the level of income) is the vertical lm curveif lm is vertical = demand for money is entirely unresponsive to the interest raterecall, the equation for the lm curve is (1) if h is zero, then there is a unique level of income corresponding to a giv

13、en real money supply vertical lm curvethe vertical lm curve is called the classical caserewrite equation (1), with h = 0: (2) implies that ngdp depends only on the quantity of money quantity theory of moneyhikypm)(ypkm11-10the classical casewhen the lm curve is vertical1.a given change in the quanti

14、ty of money has a maximal effect on the level of income2.shifts in the is curve do not affect the level of income vertical lm curve implies the comparative effectiveness of monetary policy over fiscal policy“only money matters” for the determination of outputrequires that the demand for money be irr

15、esponsive to i important issue in determining the effectiveness of alternative policieswhen the lm curve is vertical, monetary policy has a maximal effect on the level of income, and fiscal policy has no effect on income.11-11fiscal policy and crowding outthe equation for the is curve is: (3) the fi

16、scal policy variables, g and t, are within this definitiong is a part of at is a part of the multiplierfiscal policy actions, changes in g and t, affect the is curvesuppose g increasesat unchanged interest rates, ad increasesto meet increased demand, output must increaseat each level of the interest

17、 rate, equilibrium income must rise by )(biayggg11-12fiscal policy and crowding outif the economy is initially in equilibrium at e, if government expenditures increases, equilibrium moves to e”the goods market is in equilibrium at e”, but the money market is not:because y has increased, the demand f

18、or money also increases interest rate increasesfirms planned investment spending declines at higher interest rates and ad falls off move up the lm curve to einsert figure 11-4 here11-13fiscal policy and crowding outcomparing e to e: increased government spending increases income and the interest rat

19、ecomparing e to e”: adjustment of interest rates and their impact on ad dampen expansionary effect of increased gincome increases to y0 instead of y”insert figure 11-4 hereincrease in government expenditurescrowds out investment spending.11-14the composition of output and the policy mixtable 11-2 su

20、mmarizes our analysis of the effects of expansionary monetary and fiscal policy on output and the interest rate (assuming not in a liquidity trap or in the classical case)monetary policy operates by stimulating interest-responsive components of adfiscal policy operates through g and t impact depends

21、 upon what goods the government buys and what taxes and transfers it changesincrease in g increases c along with g; reduction in income taxes increases cinsert table 11-2 here11-15the composition of output and the policy mixfigure 11-8 shows the policy problem of reaching full employment output, y*, for an economy that is initially at point e, with unemploymentshould a policy maker choose:fiscal policy expansion, moving to point e1, with higher income and higher interest ratesmonetary policy exp