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(A)Show the Effects of Expansionary and Contractionary Open Market Operations

question 35

Essay

(a)Show the effects of expansionary and contractionary open market operations on the interest rate using demand and supply curves and the market for government bonds.
(b)What should the Fed do if the interest rate is below its target rate? What should the Fed do if the interest rate is above its target rate?

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Definitions:

T-statistic

A statistic derived from sample data that is used in hypothesis testing to determine if there is a significant difference between sample means.

Regression Model

A mathematical representation used in statistics that describes the relationship between a dependent variable and one or more independent variables.

Adjusted R Square

A statistical measure that indicates the proportion of the variance in the dependent variable predictable from the independent variables, adjusted for the number of predictors in the model.

Adjusted R Square

A statistical measure that indicates the proportion of variance in a dependent variable that is predictable from independent variables, adjusted for the number of predictors in the model.

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