ECON 203 Lecture Notes - Lecture 11: Output Gap, Money Supply, Canadian Dollar
4 Dec 2018
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--expenditure to move ad to the right to close the recessoinary gap what we expect is not going to happen . If ad shifts to the right then l or md is going to shift to the. Right too what happens to i (interest rate) . let"s draw it. --so with increasing md , interest rate increases at the same time analyze what happens to. It shifts down the ae0 part of the economy . so at the end we want to increase ad but with all the changes ad shifts to the right and then moves a little bit to the left. Let"s draw from ad-as diagram and see all the effects on goods market and money market: It"s happening when we have inflationary gap in the economy so the government wants to intervene through contractionary fiscal policy and to move ad to the left. -imagine we have inflationary gap: crowding in effect. --remember government - g which is government.
