Analysis Of The Aggregate Demand And The Aggregate Supply...

The aggregate demand and the aggregate supply model is a macroeconomics model that explains price level and real output through the relationship of aggregate demand and supply. The aggregate demand curve consist of consumption(C), investment (I), government spending (G), net export (NX). The question caused by monetary expansion. In this essay, it analysis monetary policy, Philips curve which relation between inflation and unemployment.it draws conclusion and apply the theory into two countries which are England and France. Basically, the monetary policy is government s or central bank s policy for controlling of the amount of currency available and the rate at which people can borrow money’. In this problem, the Ad curve shift caused by monetary expansion in Ad-As model. The graph shows Y is above the Yn. The monetary expansion is increasing size of country’s money supply and capital, reducing the tax and interest rate. For example, from the Y (level of production) = Yn (level of natural output), when central bank reduces the tax, the AD curve shifts to the right. At this moment, Y is above the Yn, and the vertical axis has P for price is above Pe for the expected price. It this situation called short-run effects. As the graph 1 shows, it illustrates about the problem. Now, we want to take back general equilibrium (short run to medium run). The goal is the AS makes to upward and Yn=Yn. When the economic situation which is supply shock. The supply shock is ‘unexpectedShow MoreRelatedMonetary Policies And Monetary Policy Essay1309 Words   |  6 Pagespolicies Monetary policies are strategies used by the central bank, financial regulatory committee of currency board to regulate the amount of money supply in the economy. There are two types of monetary policies. These are expansionary monetary policies and contractionary monetary policies. 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