ECON 2105 Lecture Notes - Lecture 18: Open Market Operation, Loanable Funds, Monetary Policy

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25 Dec 2018
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Increases by changes in resources, technology, or institutions, not changes in the money. Printing money has no effect on long-run productivity. Money supply doesn"t affect real economic variables in the long run. Treasury securities are part of the loanable funds market. The price in the loanable funds market is an interest rate. In the short run, increases in ad increase output and lower the unemployment rate. Firms can get loans more cheaply and then hire more workers. Real employment and real output expand as a result of simply increasing the money. Raises the price level as flexible prices increase. Monetary policy does not affect real gdp or unemployment. The only effect will be on the price level, a nominal variable. Resource suppliers who are contracted to sell goods at a given price. If inflation is higher than expected are hurt by tomorrow"s unexpected inflation. If inflation is lower than expected, are hurt by tomorrow"s unexpectedly low inflation.

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