The Principal Method Used by the Federal Reserve to Change

question 16

Essay

The principal method used by the Federal Reserve to change the money supply is through open-market operations. Use the aggregate demand-aggregate supply model to illustrate graphically the impact in the short run and the long run of a Federal Reserve decision to increase open-market purchases. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; v. the short-run equilibrium values; and vi. the long-run equilibrium values. State in words what happens to prices and output in the short run and the long run.

---

Definitions:

Sensory Abilities

The capacities to receive and process information from the environment through sight, hearing, smell, taste, and touch.

Applied Behavior Analysis

A therapy based on the science of learning and behavior, which aims to improve socially significant behaviors.

Cognitive Skills

Mental abilities involved in the process of acquiring knowledge and understanding through thought, experience, and the senses, such as perception, reasoning, memory, and attention.

Treatment Expense

The cost associated with medical care, including diagnostics, therapy, medication, and other interventions necessary to treat or manage conditions.