Federal Reserve Bank Case Analysis

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The overall goal of the Federal Reserve Bank is the stabilization of output in the short run and promotion of price stability in the long run. To achieve this several steps must be enacted. First, the Fed tries to estimate how the economy is doing now and how it's likely to do in the near term. Then it compares these estimates to its goals for the economy and inflation. If there's a gap between the estimates and the goals, the Fed then must decide how forcefully and how swiftly to act to close that gap. An increase in the money supply causes the aggregate demand curve to shift to the right and the aggregate demand curve to the left. Government spending is a component of aggregate demand, so changes in government spending affects aggregate
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