Short Essay Economics
Question Description
Answer one of the following options (Option A or Option B):
Option A: After reading Chapter 13 in the textbook and the lecture notes posted in Module #6, describe two of the three monetary policy tools that the Federal Reserve could use to help improve the economy if the economy is currently in an inflationary gap.
Option B: After reading Chapter 15 in the textbook and the lecture notes posted in Module #6, describe the Keynesian transmission mechanism for a decrease in the money supply, assuming that no liquidity trap exists and that investment is not interest insensitive. What impact would this money supply decrease most likely have on Real GDP and the price level under these circumstances?
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