Explain how the fed would use open market operations

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Economy Questions

- The Fed is worried about inflation. The economy is at its potential growth rate. Explain how the Fed would use Open Market Operations, the Discount rate and RRR to reduce inflation. Show the policy effect on the AD, SGC and SRAS graph.

- The Fed is worried about unemployment. Explain how the Fed would use the three tools to reduce unemployment. Show the effect on an AD, SGC, and SRAS graph.

- Assume the Fed is in a period of high inflation and high unemployment (reduction in SRAS in the short-run). Can the Federal Reserve use monetary policy to solve both problems? Why or why not?

Reference no: EM131028297

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