Determine the appropriate economic policy

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Question

Given the following information about the economy, determine the appropriate economic policy as well as the expected impact of the policy Percent change in GDP 7.9% Unemployment rate 2.7% Inflation 5.3% Fed should reduce the money supply by selling bonds, which will decrease the monetary base and increase the fed funds rate. General interest rates will rise, and AD will shift to the left Fed should reduce money supply by buying bonds which will decrease the monetary base and increase the fed funds rate. General interest rates will rise, and AS curve will shift to the right Fed should increase money supply which will increase the monetary base and decrease the FFR, general interest rate will remain unchanged Fed should do nothing as economy is in expansion.

Reference no: EM133629865

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