Price Level LRAS SRAS 108 100 90 AD1 ADo AD2 16.4 17.4 18.2 Real GDP $T 1. If the actual price level is 108, what type of gap is the economy experiencing? What is the size of this gap? 2. If the Federal Reserve tries to close this gap, and the required reserve ratio is 10%, how much will the Fed have to increase/decrease (circle one) the money supply? 3. The Fed's primary method for closing the above gap will be by buying/selling (circle one) U.S. Treasury securities. 4. Now, if the actual price level is 90, what kind of gap is the economy experiencing? What is the size of this gap?

Price Level LRAS SRAS 108 100 90 AD1 ADo AD2 16.4 17.4 18.2 Real GDP $T 1. If the actual price level is 108, what type of gap is the economy experiencing? What is the size of this gap? 2. If the Federal Reserve tries to close this gap, and the required reserve ratio is 10%, how much will the Fed have to increase/decrease (circle one) the money supply? 3. The Fed's primary method for closing the above gap will be by buying/selling (circle one) U.S. Treasury securities. 4. Now, if the actual price level is 90, what kind of gap is the economy experiencing? What is the size of this gap?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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