ECON 201 Lecture Notes - Lecture 21: Deflation, Monetary Policy, Durable Good
6 Nov 2018
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Econ201 lecture 21: the business cycle, government policy, inflation and. Explain how ad and and as forces cycles in inflation and deflation. Describe causes and consequences of deflation-falling prices. Describe the trade off between inflation and unemployment-phillips curve. Effects of ad on inflation and income (neri 1) Higher interest rates and stiffer terms for borrowing. American recovery and reinvestment act of 2009 (arra) Passed by congress on february 13, 2009 and signed by obama on february. Size of stimulus was billion (5. 5% of gdp) It seems like the stimulus package did work! (neri 7) Suppose the target is to increase real gdp by 400 billion. The government decides to increase spending by billion. The problem is that there are lags in conduct of fiscal policy. It supposes that investment spending increases as g increases. In the long run, inflation is caused when the quantity of money grows faster than potential gdp.
