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No . But you are getting there. Yes fiscal policy is the lever that determines the amount ( quantity) of money ( or demand ) driving the economy . Monetar
by bubbleRefuge 8y ago
No . But you are getting there. Yes fiscal policy is the lever that determines the amount ( quantity) of money ( or demand ) driving the economy . Monetary policy is interest rates or the price of money. And ,there is mounting evidence that hight interest rates actually have the opposite of the intended effect . That is, that higher interest rates lead to higher net income to the private sector which is a bit inflationary.
- lrajlich 8y ago> higher interest rates lead to higher net income to the private sector which is a bit inflationary. There a paper for this? low interest rates tend to be associated with poor economic conditions, in the extreme liquidity trap or secular stagnation, so this conclusion makes sense though the causal effect is the opposite of what is suggested by your comment... As an example, interest rates (ex fed funds) were really low during the great depression!