Fiscal and Monetary Policy Trick

CFA Level III
#1

If they are both tight. It is intuitive to assume an inverted curve. It is also fairly intuitive to see why them both being loose gives right to a steeper non-inverted curve. If they test, they would likely test one being tight and the other being loose. A trick I have been using is that if one is loose and the other tight, remember: FLAT = F ISCAL L OOSE. Fiscal Loose A T If Fiscal is Loose it will be a FLat curve. If Fiscal is tight and Monetary is loose then monetary dominates and gives rise to a slightly non-inverted curve. hey…whatever works

#2

Thanks, this will come in handy.

#3

Thanks, I like the other way - “monetary dominates”: it’s steeper when both are expanding; slightly upward even if the fiscal policy is tighting; …flat, …inverted.

#4

yeah I also wrote MONETARY DOMINATES in big caps above this note in my book. nice pick up (this is not sarcastic, im serious lol)

#5

yeah I also wrote MONETARY DOMINATES in big caps above this note in my book. nice pick up