Question
Suppose the Federal Reserve sells bonds (undertakes Open Market Operations) when the economy is below full employment.According to the Keynesian model and the usual effects
Suppose the Federal Reserve sells bonds (undertakes Open Market Operations) when the economy is below full employment.According to the Keynesian model and the usual effects of monetary policy, what would happen to consumption, investment, and government (rise, fall, not change)?Briefly explain each of the changes you describe within the framework of the Keynesian model.(Like 'Consumption would rise because the model assumes that.....') Would this policy on the part of the Federal Reserve be sensible if they were mostly worried about unemployment?
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