monetary policy confusion (1 Viewer)

[tazzyboys]

1. increase IR -> contraction on economy due to dampening of AD: consump and invest
2. increase IR -> increase FDI due to higher returns -> money to fund structural expansion (eco growth)

so which wins, in a way? since one is contractionary and the other is expansionary


also, quick question: fiscal is an inflation targerter because it aims at increasing efficiency and productivity within an economy, further leading to increase in real GDP

thanks

 

[JoAn.T]

1 wins for sure. But if you would like to add a band 6 substance into our exchange rate essay, you can say 2 would dampen the effect of a contratctionary monetary policy

 

[tazzyboys]

ok, so i take it that the impact on eco. growth due to FDI is negligible when compared to the reduced AD

 

[cs01001]

1. increase IR -> contraction on economy due to dampening of AD: consump and invest
2. increase IR -> increase FDI due to higher returns -> money to fund structural expansion (eco growth)

so which wins, in a way? since one is contractionary and the other is expansionary


also, quick question: fiscal is an inflation targerter because it aims at increasing efficiency and productivity within an economy, further leading to increase in real GDP

thanks

I think you got the whole thing mixed up. Fiscal policy is not the primary too to fight inflaton, contractionary Monetary Policy is.

Also, collective Microeconomic policies such as labour market policies/deregulation/relaxing of trade protection etc are policies to increase efficiency and productivity within an economy, further leading to increase in real GDP. Fiscal and Micro are totally differrent stuff.

 

[tazzyboys]

thanks for both answers

yes that would make so much more sense.
always getting monetary and fiscal mixed up