The Effects of Monetary Policy on Investment and ConsumptionTaking the US GDP Data from 1981 to 2022 as an Example

In the past few years, the COVID-19 epidemic has damaged countries' external demand, and how to expand domestic demand has become an important topic. Under the circumstances that it is difficult to reverse the sluggish trend of the world economy quickly, maintaining national economic growth and expanding domestic demand are the most effective means. Investment and consumption are the two main ways to expand total output. Exploring the impact of monetary policy on investment and consumption can measure the effectiveness of monetary policy in stimulating domestic demand and provide guidance for policy. This article takes the US GDP data from 1981 to 2022 as a sample and analyzes it using an HP-filtered time series decomposition model. It is found that both investment and consumption are positively correlated with GDP. In the long run, consumption has a greater impact on GDP, while investment has a more substantial influence in the short term. The paper also discusses concerns about the effects of excessive money supply on inflation and asset bubbles. The findings provide valuable insights for economists and policy-makers, highlighting the critical role of monetary policy in stimulating economic growth and stability.