41447 (661634), страница 3
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5. Keynesians envision monetary policy as operating through a complex cause-effect chain
a) policy decisions effect commercial bank reserves;
b) changes in reserves effect the supply of money;
c) changes in the supply of money alter the interest rate;
d) Changes in the interest rate affect investment, the equilibrium NNP and the price level;
6. The advantages of monetary policy include its flexibility and political acceptability. Further, monetarists feel that the supply of money is the single most important determinant of the level of national output.
7. Monetary policy is subject to a number of limitations and the problems
a) They excess reserves which an easy money policy provides may not be used by banks to expend the supply of money;
b) Policy-instigated changes in the supply of money maybe pertially offset by changes in the velocity of money;
c) The impact of monetary policy will be lessened if the money-demand curve is flat ant the investment-demand is steep. The investment-demand curve may also shift so as to negate monetary policy.
8. The monetary authorities face a policy dilemma in that they can stabilize interest rates or the money supply but not both. In the post-World War II period monetary policy has shifted from stabilizing interest rates to controlling the money supply and more recently to a more pragmatic position.
9. The impact of an easy money policy upon domestic NNP strangthed by an accompanying increase in net exports precipitated by a lower domestic interest rate. Likewise, a tight money policy is strengthed by a decline in net exports. In some circumstances there maybe a trade off between the use of monetary policy to affect the value of the dollar and thus to current at rage imbalance and the use of monetary policy to achieve domestic stability.
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