Topic Ten

Monetary Policy & Monetarism

Required Readings:

Lecture Video Clips:

Additional Readings:

LEARNING OBJECTIVES FOR TOPIC 10:

  • You should be able to explain the difference between monetary & fiscal policy.
  • You should be able to explain the role & functions of the Federal Reserve in the U.S. financial system.
  • You should be able to explain how the Fed increases or decreases the money supply, and the differences in the various tools the Fed has at its disposal.
  • You should be able to explain the money multiplier, and differentiate it from the expenditure multiplier
  • You should be able to explain the demand for money, and what influences it.
  • You should be able to explain the monetary mechanism; i.e. exactly how  monetary policy affects economic activity.
  • You should be able to explain and show graphically how monetary policy can be used to correct recessionary and inflationary gaps?
  • You should be able to explain the crowding out effect and how it can be avoided.
  • You should be able to explain the fundamental characteristics of Monetarist Economics, and differentiate them from other schools of thought.

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