Monetary Policy Graphs (2 of 2) - Macro 4.6

Mr. Clifford discusses the money market and its impact on aggregate demand, focusing on an inflationary gap where actual GDP exceeds potential GDP. The FED's role in adjusting the money supply to influence investment and aggregate demand is explained. A decrease in money supply raises interest rates, reducing investment and shifting aggregate demand left, closing the inflationary gap. The video also covers the FED's monetary policy tools: increasing reserve requirements, raising the discount rate, and selling bonds.

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