What happens to the value of nominal interest rate in the economy when the Federal Reserve buys government securities? W

Business, Finance, Economics, Accounting, Operations Management, Computer Science, Electrical Engineering, Mechanical Engineering, Civil Engineering, Chemical Engineering, Algebra, Precalculus, Statistics and Probabilty, Advanced Math, Physics, Chemistry, Biology, Nursing, Psychology, Certifications, Tests, Prep, and more.
Post Reply
answerhappygod
Site Admin
Posts: 899603
Joined: Mon Aug 02, 2021 8:13 am

What happens to the value of nominal interest rate in the economy when the Federal Reserve buys government securities? W

Post by answerhappygod »

What happens to the value of nominal interest rate in theeconomy when the Federal Reserve buys government securities? Whathappens in the AD-AS model when the Federal Reserve buys governmentsecurities?
Suppose an economy is producing real GDP of $600 billion.Potential GDP is equal to $450 billion, and the MPC is equal to0.8.
i) [2 points] What kind of a gap (or problem) is this countryexperiencing?
ii) [4 points] What policy action do you suggest the governmentto take to eliminate the gap? State both the specific type ofpolicy action and its size. Show your work for partial credit.
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!
Post Reply