Economics · Cheatsheet

Unit 3 · Macroeconomics

Chapter 2 · Policies

📋 Reference · always available

Monetary policy

Central bank sets interest rate. Cut ⇒ ↑C,↑I ⇒ AD right. Tools: rates, OMO, QE.

Fiscal policy

Govt spending & taxation. Expansionary: ↑G / ↓T ⇒ AD right.

Multiplier

k = \frac{1}{1-MPC}

Automatic stabilisers

Progressive tax + benefits dampen the cycle automatically.

Supply-side

Shift LRAS right (education, infrastructure, tax/deregulation) ⇒ growth without inflation.

Crowding out

Govt borrowing can raise rates and reduce private investment.