Explain the concept of gdp gap

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Reference no: EM131790467

Question: (Part A.) Given that we have an R=0.20, what would happen if the FED sold 80 billion in bonds?

(Part B.) If there was a currency (c) drain of 0l05 - calculate how part (a) would change.

(Part C) Show results from (part a) in the money market and show what would happen to Money Supply and Interest Rate

(Part D) Why would FED engage in such an activity? Use the concept of GDP Gap (recession or surplus) and explain whether they are engaging in expansionary or contractionary policy.

Reference no: EM131790467

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