Monday, August 8, 2011

Macroeconomics Help!?

The central bank will use expansionary monetary policy during the recession. It's called the easy-money policy. The policy interest rate will be low, to stimulate investment. Consumer spending will rise due to easy credit and low interest rate. The effect on GDP is subject to the multiplier effect. The price will increase to induce producers to invest and produce goods. So the aggregate price level will increase in the end.

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