How will the federal reserve adjust the money supply

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The full employment level of output is $4,000 while the current level of output is $3,600. MPC = .75 and the Required Reserves is 10%. Given this information: a. How much of an increase in Government Spending will bring this economy to full employment? Increased Government Spending will cause Crowding out (see the power point notes). To prevent Crowding out the Federal Reserve can adjust the money supply to maintain the current interest rate. b. How will the Federal Reserve adjust the Money Supply?

Reference no: EM131387493

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