Monetary Policy

The effects of monetary policy on the economy

Category:

Education

Tags:

• Monetary Policy
• Economics
• AS Economics
• A level Economics
• interest rates
• macroeconomics
• AD and AS model

[BrynJonesOnline]

For most of the time, I believe the Keynesian theory is the best solution as I see a central role for the government in guiding the economy and limiting the excesses of the free market. However, what Keynes wrote is over 80 years old and so I'm sure that if Keynes was alive today, he'd have adapted his ideas to cope with globalisation and the power of multinationals. I don't believe the legacy of Thatcher for the UK was particularly good as her economic policies had terrible social consequences

[BrynJonesOnline]

There isn't one on the conflict between objectives, butI might make a few more in a few weeks and I'll keep your suggestion in mind. Bryn

[puffyDK]

I like the video, good explanation.

Question: Isn't the growth merely short term? Doesnt low interest rates, cheap money, lead to inflation, and inflated asset prices? As we saw in the US housing market.

Question: Why does the government, and not the market, set interest rates? Would the the interest rate not better reflect the actual risk, if interest rates were set by the market?

[BrynJonesOnline]

Q 1: Whether cheap money leads to inflation or not depends on whether there is spare capacity in the economy; if there is, then AS can increase alongside AD, if not then inflation (or a worsening current account) is likely to result

Q 2: This has to do with perceived market failure. Prices set by the free market may not take account of externalities. Having said that, long term interest rates are set by the market and will reflect what direction the market believes interest rates will go

[youstinkypoonumber2]

Great video, always look back at this video for reminder

[dekster14LP]

@BrynJonesOnline

Keynes was only intrested in short term.

If you pump more money into an economy it'll make prices more expensive and the amount of goods that are bought (consumption) go up, but only on short term, on the long term people consume a constant amount, so only prices go.

So by folowing keynes, people are forced to consume or they'll be poorer, even if they don't want to consume more.

I don't get how anyone could think that's a good policy.

[joys5656]

@joys5656 

[joys5656]

i thoughtit was steve jobs!!! hahaha.........

[St00ge1]

"And the fird fing."

[georgetaylor100]

brilliant explantion- could u please make a video on conflict that can arise when aiming to achieve the macroeconmic objectives???

or is there already one, in which case could i be directed to it.

[georgetaylor100]

brilliant explantion- could u please make a video on conflict that can arise when aiming to achieve the macroeconmic objectives???

[bobichina]

Excellent !!! Crystal clear. I love your lecture.