PricelevelLRASaYc Yf YbAS₂2AD₁AS₁AD₂Real GDP per yearRefer to the figure above. If the economy is at point c, to close the output gapthe Federal Reserve canO buy US bonds and/or increase the discount rate.sell US bonds and/or increase the discount rate.O buy US bonds and/or decrease the discount rate.sell US bonds and/or decrease the discount rate.Decreasing the discount rate isan expansionary policy stance because consumers and businesses can now borrow fundsdirectly from the Fed at a lower cost, thereby encouraging private spending.a contractionary policy stance because the cost of borrowing funds falls, therebyencouraging consumption and investment spending.an expansionary policy stance because it will be less costly for banks to borrow funds andthis puts downward pressure on interest rates in the economy.a contractionary policy because it reduces banks' profit margins by lowering the return onlending.

Aggregate demand is the sum of Consumption, Investment, government spending and net export. When…

Price level LRAS a Yc Yf Yb AS₂2 AD₁ AS₁ AD₂ Real GDP per year Refer to the figure above. If the economy is at point c, to close the output gap the Federal Reserve can O buy US bonds and/or increase the discount rate. sell US bonds and/or increase the discount rate. O buy US bonds and/or decrease the discount rate. sell US bonds and/or decrease the discount rate.

Price level LRAS a Yc Yf Yb AS₂2 AD₁ AS₁ AD₂ Real GDP per year Refer to the figure above. If the economy is at point c, to close the output gap the Federal Reserve can O buy US bonds and/or increase the discount rate. sell US bonds and/or increase the discount rate. O buy US bonds and/or decrease the discount rate. sell US bonds and/or decrease the discount rate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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