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In the Short Run, If the Fed Wants to Fight

question 27

Essay

In the short run, if the Fed wants to fight a recession, should it buy or sell government securities? Why?


Definitions:

Consumption Declines

A decrease in the amount of goods and services purchased and consumed by individuals or households.

Perfectly Elastic

Describes a situation in economic theory where the quantity demanded or supplied changes infinitely in response to any change in price.

Tax

An enforced economic levy or different levy applied to a taxpayer by a governmental agency intended to provide for government spending and multiple public outlays.

Perfectly Inelastic Supply

Perfectly Inelastic Supply describes a situation in which the quantity supplied of a good does not change regardless of price movements.

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