Question

The graph represents a hypothetical picture of the U.S. economy. The Federal Reserve (Fed) determines that the economy must be stimulated. Assume that the Fed will use open market operations, the reserve ratio is 0.1, and the desired change in the money supply is an increase of $650 billion.

Answer 1

The course of action that would be used to achieve this goal would be

Buying $65 billion of government bonds

How to solve for the solution

Given that the feds are wanting to stimulate the economy, there is going to be a right shift in the aggregate demand.

There would be an increase in money supply given that the feds are going to buy bonds.

The money multiplier

1/0.1= 10

Change in reserve

= $650 billion/10= $65 billion

Hence we conclude that the way of achieving the goal would be by Buying $65 billion of government bonds

Read more on money multiplier here; brainly.com/question/4412587

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