Figure 10-6

-Refer to Figure 10-6.If the economy is experiencing an inflationary gap, the Fed would _______ government bonds, which would _______ the money supply and _______ interest rates.The results of such a policy are represented in _______ .

Question

Figure 10-6
 
-Refer to Figure 10-6.If the economy is experiencing an inflationary gap, the Fed would _______ government bonds, which would _______ the money supply and _______ interest rates.The results of such a policy are represented in _______ .

Quizplus · Accepted Answer

To close an inflationary gap, the Fed would sell government bonds, which decreases the money supply and increases interest rates. This is represented in Panel (b).

Figure 10-6 -Refer to Figure 10-6.If the Economy Is Experiencing an Inflationary