Section 3
Impacts of Federal Reserve Policies
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Boundless Economics
Economics
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5 concepts
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The Impact of Monetary Policy on Aggregate Demand, Prices, and Real GDP
Changes in a country's money supply shifts the country's aggregate demand curve.
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The Effect of Expansionary Monetary Policy
An expansionary monetary policy is used to increase economic growth, and generally decreases unemployment and increases inflation.
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The Effect of Restrictive Monetary Policy
A restrictive monetary policy will generally increase unemployment and decrease inflation.
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Limitations of Monetary Policy
Limitations of monetary policy include liquidity traps, deflation, and being canceled out by other factors.
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Using Monetary Policy to Target Inflation
Inflation targeting occurs when a central bank attempts to steer inflation towards a set number using monetary tools.