Scribd Logo
Upload

Welcome to Scribd!

  • 23 views

    Essay Macro 1

    Uploaded by

    Hồng Thy Nguyễn
    Fiscal and monetary policies can impact GDP through three main channels: 1) Cutting taxes can increase consumption by allowing consumers to save and spend more. 2) Lowering interest rates through bond purchases can stimulate more private investment. 3) Increasing government spending can boost aggregate demand through projects that employ more workers and require equipment. This shifts the aggregate demand curve out and increases GDP. A budget deficit can decrease net exports by appreciating the currency, making exports more expensive and imports cheaper on the global market.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Essay Macro 1

    Uploaded by

    Hồng Thy Nguyễn
    23 views2 pages
    Fiscal and monetary policies can impact GDP through three main channels: 1) Cutting taxes can increase consumption by allowing consumers to save and spend more. 2) Lowering interest rates through bond purchases can stimulate more private investment. 3) Increasing government spending can boost aggregate demand through projects that employ more workers and require equipment. This shifts the aggregate demand curve out and increases GDP. A budget deficit can decrease net exports by appreciating the currency, making exports more expensive and imports cheaper on the global market.

    Original Description:

    macroeconomics

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Fiscal and monetary policies can impact GDP through three main channels: 1) Cutting taxes can increase consumption by allowing consumers to save and spend more. 2) Lowering interest rates through bond purchases can stimulate more private investment. 3) Increasing government spending can boost aggregate demand through projects that employ more workers and require equipment. This shifts the aggregate demand curve out and increases GDP. A budget deficit can decrease net exports by appreciating the currency, making exports more expensive and imports cheaper on the global market.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    23 views2 pages

    Essay Macro 1

    Uploaded by

    Hồng Thy Nguyễn
    Fiscal and monetary policies can impact GDP through three main channels: 1) Cutting taxes can increase consumption by allowing consumers to save and spend more. 2) Lowering interest rates through bond purchases can stimulate more private investment. 3) Increasing government spending can boost aggregate demand through projects that employ more workers and require equipment. This shifts the aggregate demand curve out and increases GDP. A budget deficit can decrease net exports by appreciating the currency, making exports more expensive and imports cheaper on the global market.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 2

    1/ How the 2 key policies of the government affect the GDP?

    Monetary policy and Fiscal policy will change


     Cut tax -> Save more -> spend more -> Consumption (C) increase
     More investment by lower interest rate by buying bonds
     Increase Gov. Spending (G) by build airport, facilities … -> Demand more ->
    increase GDP.
     Increase Export:
    - Export more oil, T – shirt -> Demand more labour, equipment
    - Devalue domestic currency by bump more money to the market -> speed up
    export.

    As a result, the Money Supply (MS) in the market will change, lead to the change in
    interest rate (r) and shift the Aggregate Demand (AD) curve, change in AD will
    change the GDP (Y) while the Price (P) unchanged.

    Interest rate (r) P


    MS2 MS1

    r2
    P1

    r1 AD1
    MD
    AD2

    Y2 Y1
    Money Y
    2/ How does the budget deficit affect the U.S. Net Export?

    The government shortage of money supply in the market will decrease, the Aggregate
    Supply curve shifts to the left (Graph 1) and lead to the increase in interest rate. Due to
    the rise in exchange rate, the Investment from foreign countries will rise, so that the Net
    Capital Outflow (NCO) will decrease because NCO = Cash Outflow – Cash Inflow
    (Graph 2). The real exchange rate appreciates, reducing net exports (Graph 3).

    Interest rate (r) Interest rate (r)


    S’
    S

    r’
    r

    NCO
    D = I + NCO

    Money (Graph 2) NCO’ NCO


    (Graph 1) NCO

    Exchange rate (E)

    S = NCO

    E’
    E

    D = NX

    (Graph 3) NCO’ NCO USD

    You might also like

    pFad - Phonifier reborn

    Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

    Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


    Alternative Proxies:

    Alternative Proxy

    pFad Proxy

    pFad v3 Proxy

    pFad v4 Proxy