Q. Assume Fed wishes to utilize monetary approach to close an expansionary gap.
a. Should the Fed increase or decrease the funds provide?
b. If the Fed utilizes open-marketplace operations, should it buy or sell government securities?
c. Conclude whether every of the subsequent increases, decreases or remains unchanged in the short-run: the marketplace interest rate, the quantity of funds demanded, investment expenditure, cumulative demand, potential o/p, the price level also equilibrium real GDP.
Q. Manufacturers begin building a new plant in Arizona. Which determinant of cumulative demand causes the change?