Explain how the holding of a range of assets in people’s portfolios may help to create a more direct link between changes in money supply and changes in aggregate demand.
Answer to relevant QuestionsExplain how financial crowding out can reduce the effectiveness of fiscal policy. What determines the magnitude of crowding out?Under what circumstances would a rightward shift in the ADI curve lead to a permanent increase in real national income?What are the mechanics whereby the central bank raises the rate of interest?How can adaptive expectations of inflation result in clockwise Phillips loops? Why would these loops not be completely regular?What is the significance of the term ‘endogenous’ in endogenous growth theory? What, according to this theory, determines the long-run rate of economic growth?
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