What happens to the value of nominal interest rate in the economy when the Federal Reserve buys government securities? W
Posted: Sun Jul 03, 2022 6:55 am
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.
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.