Monetary Policy and Macroeconomics stabilization
By Katie Cederberg

Adherents of monetarism believe that the money supply is the most important factor in macroeconomic performance

The inside lag are delays in implementing policy. These lags occur for 2 reasons. First it take time to identify the problems. Second, once the problem has been recognized it can take additional time to enact policies.

The easy money policy will increase the money supply. The increased money supply will lower interest rates

Once a new policy is determined, it takes time to become effective. That time period is known as the outside lag, this differs for monetary and fiscal policy.

Tight money policy will reduce the money supply which pushes the interest rates upwrd

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