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Why is there a multiplier effect on the quantity of money

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Assignment

1. Suppose the Fed conducts an open market operation in which it buys government securities from a commercial bank. Why is there a multiplier effect on the quantity of money?

2. Is it possible for nominal GDP to increase while real GDP does not change? Why or Why not? To answer this question, start with the definition of nominal and real GDP. Also, make any example to support your answer.

Reference no: EM131941184

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