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- 2011-7-11
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2#
发表于 2011-7-13 16:37
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With MS, AD, AS, and interest rates, I always remember the 2 graphs.
1) Quantity of money to interest rates (with Money Supply as vertical and Money Demand as downward sloping line
2) GDP to Price Level (with LRAS, SRAS, AD)
First with Graph 1, increase in the supply of money will simply shift the vertical line to the right, increasing the Q of Money and decreasing the interest rate.
Secondly, think about the effects of decreased interest rates on AD (increased capital investment, consumption, and other factors), this all shifts AD to the right, which creates the Long run disequilibrium.
On the same graph, that shift in AD to the right, makes effect on SRAS, which represents producers, who see the increase in demand and wish to produce more, which has an upward pressure on wages and other factor resources, which shifts the SRAS left.
Therefore the economy is back in LR equilibrium with increased prices and same GDP.
Same way works for the decrease in money supply.
Essentially, the Keynesian policy is based on the above process.
Monetarists believe in increasing of labor force, technology and capital to increase overall economy. |
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