chapter 5 n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
CHAPTER 5 PowerPoint Presentation
Download Presentation
CHAPTER 5

Loading in 2 Seconds...

play fullscreen
1 / 16

CHAPTER 5 - PowerPoint PPT Presentation


  • 145 Views
  • Uploaded on

CHAPTER 5. Monetary Theory and Policy. CHAPTER 5 OVERVIEW. This chapter will: A. Describe the impact of monetary policy B. Explain the tradeoffs involved in monetary policy C. Describe how financial market participants monitor and forecast the Fed’s policies. A. Impact of Monetary Policy.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'CHAPTER 5' - hayden-weiss


Download Now An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
chapter 5

CHAPTER 5

Monetary Theory and Policy

chapter 5 overview
CHAPTER 5 OVERVIEW

This chapter will:

A. Describe the impact of monetary policy

B. Explain the tradeoffs involved in monetary policy

C. Describe how financial market participants monitor and forecast the Fed’s policies

a impact of monetary policy
A. Impact of Monetary Policy

1. Correcting a Weak Economy

a. Fed can stimulate the economy by creating a loose-money policy and engages in

1.) buying government securities

2.) lowering the lending rate

3.) lowering the reserve requirement

a impact of monetary policy1
A. Impact of Monetary Policy

2. Correcting High Inflation

a. The Fed can constrain economic activity when it creates a tight-money policy and

1.) sells government securities

2.) raises the lending rate

3.) increases the reserve requirement

b tradeoff in monetary policy
B. Tradeoff in Monetary Policy

1. The Tradeoff

a. Studies indicate there exists an inverse relationship between inflation and unemployment

  • the lower the unemployment, the greater the inflation,
  • the higher the unemployment, the lower the inflation
b tradeoff in monetary policy1
B. Tradeoff in Monetary Policy

2. When inflation is high, tight money policy is considered.

Tradeoff is higher unemployment

b tradeoff in monetary policy2
B. Tradeoff in Monetary Policy

3. When unemployment is high, loose-money policy is considered.

Trade off is higher inflation

c monitoring and forecasting the fed s policy
C. Monitoring and Forecasting the Fed’s Policy

1. Economic Indicators Monitored by the Fed

a. Indicators of Economic Growth

1.) GDP

2.) Industrial production index

3.) Unemployment rate

4.) Consumer confidence surveys

b. Index of Leading, Coincident, and Lagging Indicators

c monitoring and forecasting the fed s policy1
C. Monitoring and Forecasting the Fed’s Policy

2. Indicators of Inflation

a. Producer and Consumer Price Indexes

b. Other Indicators

discussion
Discussion
  • How Fed Chair’s speech affect financial market
summary
Summary
  • 1. The effect of monetary policy
  • 2. Homework Assignment 3 continue: Questions and Applications 1,2.