Lecture 6: IS-LM, continued

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MIT 14.02 Principles of Macroeconomics, Spring 2023
Instructor: Ricardo J. Caballero
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In this lecture, Prof. Caballero continues his explanation of the the IS-LM model, which shows the relationship between interest rates and output in the short run in a closed economy.
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20 сен 2024

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Комментарии : 10

@forheuristiclifeksh7836 2 месяца назад

8:50 LM relation

@田中太郎-t6z8d 2 месяца назад

I have two questions. 1. why war typically goes all in despite the fact that central banks are independent? they are no longer aiming price stability? 2. what is the meaning of negative interest rate? Japan did that despite of the liquidity trap.

@abdullahkeskin6695 Месяц назад

İn War times, monetary and fiscal policies are both expansionary. Nominal interest rate doesn't go below zero but Real interest rate does. Because, Real interest rate is nominal interest rate minus inflation rate

@田中太郎-t6z8d Месяц назад

@@abdullahkeskin6695 thank you for the reply, but I'm asking why monetary and fiscal policies are both expansionary in war times.

@abdullahkeskin6695 Месяц назад

@@田中太郎-t6z8d because, government needs more money to spend on any kinds of weapon and other things to win the War. You can check the applied policies of those countries involved in the wars during the ww ı and ww ıı. Primary Target of county is to win the War rather than price stability.

@abdullahkeskin6695 Месяц назад

@@田中太郎-t6z8d primary goal of the country is to win the War, not price stability. During the War government needs to spend much more money on weapons and other requirements.

@abdullahkeskin6695 Месяц назад

@@田中太郎-t6z8d let me explain the mechanizm how both are expansionary: government has to increase tax and/or debt to cover the War spendings. Forget the tax and think about debt. Government sells treasury bills/bonds more and more, as a result interest rate increases; central bank has to buy treasury bills/bonds to reduce interest rate which means expansionary monetary policy.