Accomodating monetary policy Teen moms webcam
Increase in investment demand through multiplier process leads to a greater increase in aggregate demand and national income.
If the economy suffers from inflation, the Government will like to check it.
But while inequality is a problem, raising interest rates is no way to address it.
SWARTHMORE – In the United States and elsewhere nowadays, populist politicians often claim that easy monetary policy is hurting ordinary workers, thereby exacerbating income inequality.
Likewise, it can be illustrated that the reduction in Government expenditure will cause a leftward shift in the IS curve, and given the LM curve unchanged, will lead to the fall in both rate of interest and level of income.
It should be noted that Government often cuts expenditure to control inflation in the economy.
More investment will cause aggregate demand and income to rise.
The rise in interest rate which will cause reduction in investment demand and consumption demand and help in controlling inflation.
In the US and elsewhere nowadays, populist politicians often claim that easy monetary policy is hurting ordinary workers, thereby exacerbating income inequality.
It is worth noting that in the IS-LM model increase in national income by Y in Fig.
20.6 is less than EK which would occur in Keynes’ model.
Search for accomodating monetary policy:
Expansionary Fiscal Policy: Reduction in Taxes: An alternative measure of expansionary fiscal policy that may be adopted is the reduction in taxes which through increase in disposable income of the people raises consumption demand of the people.