Obama and Mundell Fleming
Obama’s Monetary Policy
Cause:
In order to gain voter confidence, Obama enacts monetary policy to inject the US with a flow of funds into the economy.
Step by Step Effect:
1. Money supply increases, consumers now have more “in the jeans”
2. The domestic interest rate falls and the 1% bails due to low yield rates; funds head to Mexico.
3. Low rates means the USD depreciates, foreigners get excited and start buying more from target.com.
4. In a flurry of activity, people are now somewhat employable, and the future is so bright we gotta wear shades.
5. Foreigners are catching the fever and buying so many pairs of Rayban sunglasses that the USD appreciates.
6. Obama looks like a hero and gets re-elected
7. Sunglasses are now ridiculously expensive compared to the Chinese made ones, Net Exports fall.
8. People are getting laid off and cursing Obama.
9. Overall change? Prices are now higher.
