Multiple Choice
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The economy is at the equilibrium shown as point a in the above figure. To restore the economy to potential GDP, the Fed should
A) sell government securities and thereby decrease aggregate demand.
B) sell government securities and thereby increase aggregate demand.
C) buy government securities and thereby increase aggregate demand.
D) buy government securities and thereby decrease aggregate demand.
E) buy government securities and thereby increase aggregate supply.
Correct Answer:
Verified
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