(Answered) The fed responded to the financial crises by an aggressive

Economics

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.

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Business Economics, Economics

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