When making monetary policy changes decision makers are concerned with the macroeconomic goals of maintaining stable prices, full employment, and an economic growth rate that is sustainable. Two measurements are used to analyze the impact of policy changes on these goals: aggregate demand (AD) and aggregate supply (AS). An AD curve is used to show how combinations of price level and income can result in a simultaneous equilibrium in the real goods and money markets. An AS curve demonstrates the price level at which companies are willing to produce goods and services.
Explain how changes in monetary policies can affect one or both of these measurements (AD and AS). [In my pwpt lecture, I focus primarily on how monetary policy most directly affects AD. Although, it is possible to link changes in monetary policy to LR changes in AS if you wish to go this route.
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