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Monetary Policty - Coggle Diagram

- - - - Frictional Unemployment in the short term occurs when people bounce between jobs
      - Cyclical Unemployment is associated with the the cyclical downturns within an economy
      - Seasonal Unemployment is when the workers are employed by not on a regular basis, but rather seasonal
      - Structural Unemployment is when the permament fall is in demand for a specific type of labor or a change in the institutional framework of the economy
    - - To decrease the taxes on income
      - To increase the spending by the government
      - To be reducing the rates of interest, and increase the supply of money
    - - https://www.cnbc.com/select/impact-of-fed-rate-cut-amid-coronavirus-concerns/#:~:text=The%20latest%20Fed%20rate%20cut,loans%2C%20savings%20accounts%20and%20more.
      - The
    - - Pros
        
        It is quick to be put back into place, some policies are decided by the central bank and so the process wouldn't be as long as fiscal policy
        
        Has the ability to make some small chances because interest rate can be finetuned and tweaked making it easier to reach a goal rather than fiscal policy
        
        There are no interventions from political parties because the policies are made by the central bank and no such political processes go through
      - Cons
        
        It is innefective when interest rates become too low. The central bank will continue to reduce the rates of interest as expansionary monetary policy. The rates will eventually get to zero and there will be no room for cutting
        
        The time lag is likely as the AD will increase and by the time the economy would have already recovered and the extra impetus can then be inflationary
        
        Even if the interest rate is reduced, theoretically people would borrow more and spend more and if there is lower consuming, the effects of the policy will be gone.
  - - - Cost Push inflation can also cause it as it results in an increasing in costs of production
      - Demand Pull Inflation can cause it as it results in increases of aggregate demand
    - - Fiscal Policies that are contractionary
      - Policies that are supply sided and woul theoretically work, but no as efficiently
      - By implementing a contractionary monetary policy, can increase the rate of interests
    - - https://www.cnbc.com/2022/04/08/heres-how-the-fed-raising-interest-rates-can-help-get-inflation-lower-and-why-it-could-fail.html
      - The Canadian Bank announced thatthey plan to double their rates of interest that going from 1% to 2% which would be benificiary to decrease the high rates of inflation. Due to inflation, home prices have increased tremendously of an average from $1 million to $1.3 million. A negative that would however come out of this would be that it'd reduce economic growth, thus decreasing RGDP and increasing unemployment
    - - Pros
      - Cons
        
        The rate of interests will be higher meaning that there will be harm on the economy as for the people whom have taken a loan or have a mortgage.
        
        The higher rates of interest can also result in firms borrowing less often, and that would mean less investments which therefore harms economic growth
        
        If the nature of inflation is cost push, then the higher price that that of a lower GDP will be accompanied, meaning more unemployment
- - - - https://www.reuters.com/business/finance/us-mortgage-interest-rates-reach-12-year-high-demand-falters-2022-04-20/
      - The rates of interest on mortgages in the US hit an all time high after 12 years whilst looking to cool down on the US home market. Due to this, there have been less purchases for homes in the US. A negative effect of this would be that it'll cause decrease of RGDP whilst causing more unemployment and possibly increased unemployment rates.
    - - The graph shows a shift to the left for Aggregate Demand which causes a new equilibrium and it to be at full level of employment. On the y axis, the GDP decreases, and on the X axis the APL also decreases.
  - - - https://www.washingtonpost.com/business/2022/02/06/federal-reserve-inflation-money-supply/
      - The federal reserve in the US had increased their money supply by almost 40% whilst dealing with the covid pandemic. This did solve unemployment, however it caused high inflation rates. This example here shows a con of the monetary policy because theres a trade off because as unemployment decreases, inflation increases.
    - - There is a shift to the right of aggregate demand and a new equilibrium level in which it is at full employment. For the y axis, the GDP increases and on the X axis the Average Price Levels increased as well, meaning increased inflation.