Please enable JavaScript.
Coggle requires JavaScript to display documents.
3.1. - 4.1. Monetary and Fiscal Policy - Coggle Diagram
3.1. - 4.1. Monetary and Fiscal Policy
So sánh Monetary & Fiscal Policy
Fiscal
Expansionary FP
Increase spending
Decrease taxes
Contractionary FP
Decrease spending
Increase taxes
Budget
Surplus: Tax revenue > GOV expenditure
Deficit: Tax revenue < GOV expenditure
Monetary
Expansionary MP
Increase money supply
Decrease interest rate
Increase AD
Contractionary MP
Decrease money supply
Increase interest rate
Money
Definition
Money is most commonly defined as a
generally accepted medium of exchange,
including:
Narrow money
= (Notes + coins) in circulation + other highly liquid deposits
Broad money
= Narrow money + the entire range of liquid assets that can be used to make purchases
3 Primary function
Medium of exchange / means of payment
Unit of account
Store of value
Money creation process
A minimum percentage of deposits as reserves:
Required reserve ratio = required reserves / Total deposits
this process is resulted from the
lending, spending and depositing process
of the commercial banks
Money multiplier = 1 / Required reserve ratio
Theories of the demand for the supply of money
Supply of money (MS)
Supply of money
is determined by the central bank ( FED) and is independent of the interest rate
=>
vertical money supply curve
CB can affect
interest rate
by adjusting the
MS
Increase in MS => decrease interest rate
Decrease in MS => increase interest rate
Demand for Money (MD)
is known as the amount of wealth that households and firms in an economy choose to hold in the form of money
Cụ thể:
Transaction demand: cần để giao dịch
Precautionary demand: nắm để dự phòng cho tương lai
Speculative demand: đầu cơ
MD inversely related to interest rate
=>
downward - sloping money demand curve
Fisher effect
Rnom = Rreal + E[i]
Rnom = Rreal + E[i] + RP
Inflation
Cost of expected inflation
Expected inflattion
is the inflation rate that economic agents expect to see in the economy in the future
Menu cost: Costs to business of having to change prices of goods and services
Shoe leather costs: Cost to individual to deal with the effects of inflation: chi phí phải giữ tiền ít để hạn chế ảnh hưởng của lạm phát
Cost of unexpected inflation
Higher risk premium in borrowing rates: người cho vay yêu cầu risk premium nhiều hơn, rate cao hơn
Inequitable transfer of wealth: chuyển đổi tài sản không công bằng
Inflation > expected: benefit borrowers
Inflation < expected: benefit lenders
A reduction in the infor content of market prices: giá dựa trên cung - cầu ko còn đáng tin nữa do bị lạm phát chỉnh rồi