The objective of financial policy, at the least in this easy model, is always to affect the interest rate so the rate of interest will affect the degree of planned investment internet protocol address. After we change Ip, the effects that are further the same as a improvement in federal government investing, G, into the income-expenditure model introduced into the chapters 9 and 10.
Caution no. 1: that above-described group of causal links — through the Federal Reserve towards the cash supply towards the interest towards the willingness of capitalists to borrow to fund money investment — could be the way that is only tale works. Continue reading “Macro Notes 2: The Amount Of Money Provide”