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Aggregate Demand schedule

1. If the public's demand for US currency increased by $100 Million what action in the "open market" would the Fed have to take to prevent bank reserves from falling?

2. Which of the following A or B would have a larger impact on AD? Explain your answer.

A) A program of tax rebates distributed uniformly across the population of households filing tax returns, amounting to $10 billion total.

B) A $10 billion increase in federal government spending on repairs to highways and bridges.

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1. If the public's demand for US currency increased by $100 Million what action in the "open market" would the Fed have to take to prevent bank reserves from falling?
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<br>If the public's demand for US currency increased, people intend to buy more USD and sell more foreign currency. Then there will be excess demand for USD, and the "price" of USD - US exchange rate will be pushed up. Then the Fed will buy government securities in the open market to increase money supply. Because people sell ...

Solution Summary

Aggregate Demand schedule is portrayed.

$2.19