Monetary Policy Graphs (1 of 2) - Macro 4.6

Mr. Clifford discusses monetary policy, focusing on the relationship between interest rates and investment, and how these affect aggregate demand. He explains how to address a recessionary gap by increasing the money supply, which lowers interest rates and boosts investment, thereby increasing aggregate demand. The video also covers the tools the Federal Reserve uses to manage the money supply, such as lowering reserve requirements, discount rates, and buying bonds.

What is a recessionary gap and how can it be addressed according to the text?

Describe the chain of events that occurs when the money supply is increased.