Основы экономики. Земскова Л.П. - 20 стр.

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20
9. The analysis of aggregate demand suggests that it is relatively simple to
affect the level of output and employment through active monetary and fiscal
policy. However, the aggregate supply side must be brought in to understand
how the price level and level of output are jointly determined.
KEY TERMS
Monetary mechanism
Nominal balances
Real balances
Opportunity cost of holding money
Purchasing power of money
Money market equilibrium
Crowding out
Nominal interest rate
Real interest rate
Monetary-fiscal policy mix
Investment tax credit
Stock market
Easy money
Tight fiscal policy
Keynesian economics
Activism
PROBLEMS
1. Explain the effects on the demand for (1) nominal money balances and (2)
real money balances of an increase in the price level, with real income and
the interest rate staying unchanged.
2. Suppose the government wants both to reduce aggregate demand and to
increase investment. Can it do so?
3. Suppose the government pursues the following monetary-fiscal mix: Fiscal
policy takes the form of an investment tax credit, and the monetary policy
involves an open market sale of securities by the Fed. What happens to GNP
and to investment?
4. Suppose firms become more optimistic about their future profit opportunities.
What is the effect on the interest rates and equilibrium income?
LECTURE 10. UNEMPLOYMENT
1. In the United States a person is defined as unemployed if he or she is out of a
job and has looked for work during the past 4 weeks. This definition
produces odd results in some special cases – for instance, someone waiting to
take a job within the next month counts as unemployed. Labor market

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