18.Explain how to use an open market operation to expand the money supply.

Describe how the policy tool works starting with the actions taken by the FMOC and ending with the appropriate shift in AD. Refer to page 675. Include graphs in your answer.

Answer will include:

1. Specific action taken by the FED.

2. Change in the money supply due to the action taken by the FED.

3. Impact of the change on current interest rates.

4. Changes to Investment and/or Consumption due to the change in interest rate.

5. Resulting shift in Aggregate Demand.