Suppose that each 0.1-percentage-point decrease in the equilibrium interest rate induces a $10 billion increase in real
Question:
a. How much must real planned investment increase if the Federal Reserve desires to bring about a $100 billion increase in equilibrium real GDP?
b. How much must the money supply change for the Fed to induce the change in real planned investment calculated in part (a)?
c. What dollar amount of open market operations must the Fed undertake to bring about the money supply change calculated in part (b)?
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