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In response to an inflationary gap, the Fed decides to sell securities, causing interest rates to ____________ (fall/increase/be unaffected). As a result of Fed action, aggregate __________

In response to an inflationary gap, the Fed decides to sell securities, causing interest rates to ____________ (fall/increase/be unaffected).

As a result of Fed action, aggregate __________ (supply/demand) shifts   _____________ (leftward/rightward) in the short run in response.

Unemployment   _____________ (increases/decreases/stays the same) due to the policy of the Fed and inflation _______________ (increases/decreases/stays the same).

In the long run output is ___________ (lower/higher/unchanged) due to fed policy versus letting the economy return to equilibrium on its own.

On the other hand, If the Fed choose to do nothing, in the long run, aggregate _____________ (supply/demand) would have shifted to the  _________ (left/right). Output in the long run if the Fed does NOT intervene would be   ___________ (higher/lower/unchanged) and the price level would be  ___________ (higher/lower/unchanged) than if the Fed did intervene.

Jun 07 2021 View more View Less

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