Snpping Tool ewF ORMAT Parngrag Drawing Use a diagram to illustrate how the Fed

Question

Snpping Tool ewF ORMAT Parngrag Drawing Use a diagram to illustrate how the Fed can reduce inflationary presaures by conducting open market sales of U.S government securties Suppose that, initially, the US economy was in an aggregatse demand curve AD in the diagram Now, the Fed has conducted open market sales of U.S. government securibies. This happens to have no measurable effects on either the short-run or the long-nun aggregate supply curve in the United Stabes i does, however, infuence U.S aggregate demand supply equilbrium all point A along the aggregate LRAS RAS As a result of this open market sales of U.S govenment securitos, the AD curve will shit to AD1 and the new equilibrium will be the port --andth, price lev" wd increase open market sales ous asamut ofte open market-ofus as a of The real GDP will increase govemment secuntes by the Real GOP per Year in Suppose that the graph below represents the current state of the economy 1) Uaing either the line drewing or 3-point curved ine drawing tool show how monetary policy could be used to nestore long-u equlibrium in this economy. Properly label your curve RAS RAS 2) Using the point drawing tool, show the new equilbrium point Label the point E

Explanation / Answer

Sale of government bonds decreases supply of money in the economy.

1) AD2

2) Point D

3) will decrease

4) decrease

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