1) Suppose there is an increase in aggregate demand. If the Fed wants to stabilize output it could buy bonds. However these purchases move the price level further from its original level. sell bonds. However these sales move the price level farther from its original level. sell bonds. These sales also move the price level closer to its original level. buy bonds. These purchases also move the price level closer to its original level.

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter15: Monetary Theory And Policy
Section: Chapter Questions
Problem 2.5P
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1) Suppose there is an increase in aggregate demand. If the Fed wants to stabilize output it
could
buy bonds. However these purchases move the price level further from its
original level.
sell bonds. However these sales move the price level farther from its original
level.
sell bonds. These sales also move the price level closer to its original level.
buy bonds. These purchases also move the price level closer to its original
level.
Transcribed Image Text:1) Suppose there is an increase in aggregate demand. If the Fed wants to stabilize output it could buy bonds. However these purchases move the price level further from its original level. sell bonds. However these sales move the price level farther from its original level. sell bonds. These sales also move the price level closer to its original level. buy bonds. These purchases also move the price level closer to its original level.
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