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Country X is currently in a recession, and the Central Bank decides to take action to bring the country back to full employment. A. B.
Country X is currently in a recession, and the Central Bank decides to take action to bring the country back to full employment. A. B. C. rum Identify an open-market operation that the central bank should engage in Draw a correctly labeled graph of the money market to show the change you indicated in part (a) and to show the effect on the nominal interest rate Using an aggregate demand and aggregate supply graph, show the original status of Country X, labeling full employment Y1 and equilibrium output and price level as Y1 and PLl, respectively. Then show the eect of the monetary policy action you indicated in (a) on the graph, and label the new equilibrium price level PLZ. . What is the effect of the open-market operation you indicated in part (a) on the price of bonds? What is the reserve requirement? Suppose Amanda deposited $2000 into her checking account at this bank. Calculate each of the following: a. The immediate change in the M1 measure of money b. The change in required reserves . What eect does the above transaction have on each of the following? a. The supply of loanable inds b. The real interest rate . If the nominal interest rate is 5 percent and the real interest rate is 3 percent, calculate the ination rate
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