tailieunhanh - Lecture Principles of economics - Chapter 25: Macroeconomic policy

This is the second of two chapters that set out and apply the aggregate demand - aggregate supply model. This chapter applies the aggregate demand - aggregate supply model to macroeconomic policy. The first half of the chapter consists of extensions of issues introduced in the previous chapter. The second half of the chapter discusses inflation expectations and central bank credibility, the effects of fiscal policy on long-run aggregate supply, and concludes with a discussion of macroeconomic policy in general. | Macroeconomic Policy Chapter 25 McGraw-Hill/Irwin Copyright © 2015 by McGraw-Hill Education (Asia). All rights reserved. Learning Objectives Discuss the policy options available to the central bank in response to demand shocks and inflation shocks Explain the roles played by the anchored inflationary expectations and central bank credibility in keeping inflation low Describe how fiscal policy can affect both aggregate demand and aggregate supply Address why macroeconomic policy is as much art as a science Stabilization Policy and Demand Shocks Output Y AD1 Y 1 Inflation rate e AD2 Y* 1 AS2 Responding to Aggregate Inflation Shocks The economy begins in long-run equilibrium at Y1, 1 Adverse inflation shock shifts aggregate supply to AS2 Central bank follows its monetary policy rule and raises interest rates Recessionary gap at Y2 with higher inflation, 2 The central bank chooses Close the recessionary gap Restore target inflation rate LRAS Output (Y) 1 AD1 Y 1 Inflation ( ) AS1 Y2 | Macroeconomic Policy Chapter 25 McGraw-Hill/Irwin Copyright © 2015 by McGraw-Hill Education (Asia). All rights reserved. Learning Objectives Discuss the policy options available to the central bank in response to demand shocks and inflation shocks Explain the roles played by the anchored inflationary expectations and central bank credibility in keeping inflation low Describe how fiscal policy can affect both aggregate demand and aggregate supply Address why macroeconomic policy is as much art as a science Stabilization Policy and Demand Shocks Output Y AD1 Y 1 Inflation rate e AD2 Y* 1 AS2 Responding to Aggregate Inflation Shocks The economy begins in long-run equilibrium at Y1, 1 Adverse inflation shock shifts aggregate supply to AS2 Central bank follows its monetary policy rule and raises interest rates Recessionary gap at Y2 with higher inflation, 2 The central bank chooses Close the recessionary gap Restore target inflation rate LRAS Output (Y) 1 AD1 Y 1 Inflation ( ) AS1 Y2 2 AS2 Accommodating an Aggregate Inflation Shock Suppose the central bank moves to close the recessionary gap Eases monetary policy, lowering interest rates at 2 Resets target inflation rate to 3 Lower interest rates stimulate consumption and investment spending AD shifts to AD2 Long-run equilibrium is now at Y1 and 3 Aggregate inflation shock leads to higher long-run inflation LRAS Output (Y) 1 AD1 Y 1 Inflation ( ) AS1 3 Y2 2 AD2 AS2 Responding to An Aggregate Inflation Shock Suppose the central bank decides to maintain inflation at 1 Inflation is 2, above expected inflation of 1 The central bank raises interest rates Along AS2, expected inflation is 3 When the central bank fails to respond with looser monetary policy, expected inflation decreases AS2 shifts back to AS1 Original long-run equilibrium is restored LRAS Output (Y) 1 AD1 Y 1 Inflation ( ) AS1 Y2 2 AS2 3 Anchored Inflationary Expectations Anchored inflationary expectations means peoples expectations .

• Kinh tế học
• Principles of economics
• Lecture Principles of economics
• Macroeconomic policy
• Stabilization policy
• Demand shocks
• Aggregate inflation shock
• Ten principles of economics
• People face tradeoffs
• Opportunity cost
• Marginal changes
• Economics of information
• Consumer choice
• Free rider problem
• Market transactions
• Welfare Economics
• Consumer surplus
• Demand curve
• Efficiency of markets
• Nature of an externality
• Market inefficiency
• Negative externalities
• Principles of microeconomics
• Lecture Principles of microeconomics
• Scarce resources
• Scarcity implies choice
• Choice implies cost
• Principles of agricultural economics
• Agricultural economics
• Economics of agricultural production
• Theory of consumer behaviour
• Economics of market demand
• Dynamics in demand analysis
• Analysis of agricultural markets
• Agricultural markets
• Economics of trade
• Costs of taxation
• Deadweight loss
• Laffer curve
• Supply side economics
• Market forces
• Supply and demand
• Market economies
• Competitive Markets
• Thinking like an economist
• Economic models
• Circular flow diagram
• Production possibilities frontier
• The gains from trade
• Production possibilities
• Comparative advantage
• Absolute advantage
• Costs of production
• Total revenue
• Total cost
• Opportunity costs
• Price elasticity of demand
• Price elasticity
• Midpoint method
• Demand curves
• Factors of production
• Demand for labor
• Production function
• Marginal product of labor
• Controls on prices
• Price ceiling
• Price floor
• Market outcomes
• Theory of consumer choice
• Budget constraint
• Indifference curve
• Marginal rate of substitution
• Measuring nation’s income
• Economy’s income
• Gross domestic product
• Components of GDP
• International trade
• Determinants of trade
• Equilibrium without trade
• Production and growth
• Economic growth
• Monetary system
• Functions of money
• Federal reserve
• Central bank
• Open economy macroeconomics
• Economy macroeconomics
• Closed economy
• Open economy
• Public goods
• Common resource
• Types of goods
• Cost benefit analysis
• Aggregate demand
• Aggregate supply
• Short run economic fluctuations
• Economic fluctuations
• Tax system
• Federal Government
• Marginal tax rate
• Budget surplus
• Debate over macroeconomic policy
• Stabilize the economy
• Monetary policy