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In this lecture we will examine the links between the goods market and the money market. We will then examine how the interaction of the goods market and the money market affects the implementation of fiscal and monetary policy. Upon completion of this lecture, you should understand and be able to answer these key questions: 1. How can what happens in the money market possibly affect what happens to economic output, inflation, and unemployment? 2. If the government tries to stimulate the economy, will what happens in the money market help or hurt? 3. Can the government come up with a combination of policies that will make the recovery from a recession more rapid? 4. What are "animal spirits" and what do they have to do with investment?
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