Chính sách tiền tệ sẽ được tương đối hiệu quả. Một mở rộng của cung tiền sẽ giảm lãi suất. Điều này sẽ làm tăng tổng cầu trực tiếp dẫn đến sự mất giá trong tỷ giá hối đoái, tăng xuất khẩu và giảm nhập khẩu, qua đó tiếp tục kích thích nhu cầu tổng hợp, nguyên nhân ban đầu vượt quá tỷ giá hối đoái, | Introduction to Economics ECO401 VU Monetary policy would be relatively effective. An expansion of the money supply will reduce interest rates. This will increase aggregate demand directly lead to a depreciation in the exchange rate which will increase exports and reduce imports thereby further stimulating aggregate demand cause initial exchange rate overshooting reinforcing the boost to demand from increased exports and reduced imports. Fiscal policy will be relatively ineffective. A cut in taxes and or an increase in government expenditure will increase the transactions demand for money and thus increase interest rates. The exchange rate will appreciate. This will have the effect of dampening the rise in aggregate demand. Under what circumstances would an expansionary fiscal policy have no effect at all on national income i The greater the degree of capital mobility the bigger will be the balance of payments surplus resulting from the expansionary fiscal policy and the higher interest rates it produces and the more the exchange rate will appreciate and hence the more aggregate demand will be reduced again through exports. ii The greater the price elasticity of demand for imports and exports the more the appreciation will reduce aggregate demand again. The bigger these two effects the more likely it is that fiscal policy will have no effect on national income under floating exchange rates. How would a monetarist answer the Keynesian criticisms given below 1. The time lag with monetary policy could be very long. Monetarists do not claim that monetary policy can be used to fine tune the economy. It is simply important to maintain a stable growth in the money supply in line with long-term growth in output. 2. Monetary and fiscal policy can work together. onetarists would argue that it is the monetary effects of fiscal policy that cause aggregate demand to change. Pure fiscal policy will be ineffective leading merely to crowding out. 3. The velocity of money is not .
