Learning objectives
Predict the short-run effects of expansionary or contractionary fiscal policy on real output, the price level, unemployment and the interest rate
Predict the short-run effects of expansionary or contractionary monetary policy on real output, the price level, unemployment and the interest rate
Analyze the combined effect of fiscal and monetary policy used together, identifying when the effect on output is reinforced and when the effect on the interest rate is indeterminate
Explain how the appropriate policy response to a supply shock differs from the response to a demand shock, and why a negative supply shock forces a trade-off between inflation and unemployment
Recommend an appropriate fiscal or monetary policy response to a given output gap and justify it with correctly labeled graphs
Continue with a revision plan
These learning objectives are available to everyone. Sign in with an eligible plan to read the full note and worked examples.