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The Fed responded to the financial crises by an aggressive and persistent monetary easing by purchasing long-term government bonds. a. Use the AD-AS model to demonstrate the Fed's response to the financial crises. Display the starting point (i.e. point 1) as the pre-response inflation rate that is below the target inflation, and the pre-response output is below the potential output. b. Use the MP curve or the IS curve to explain the effect of the Fed's policy on the real interest rate.
This document contains various important questions and their appropriate answers in the subject field of Economics.
Economics is the study of the principles governing the allocation of scarce means among competing ends when the objective of the allocation is to maximize the attainment of the ends.
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