the real interest rate to If the output gap is positive, the Federal Reserve will O raise; cool inflationary pressures O lower; reduce unemployment O lower; cool inflationary pressures Oraise; reduce unemployment

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Scenario 13.1 Assume the following conditions hold. a. At all banks, excess reserves are zero. The deposit expansion multiplier is 3. The investment spending function is as illustrated in the figure below. b. C. Now the Federal Reserve engages in an open market operation by purchasing $1 billion worth of government bonds from private bond dealers, who then deposit the $1 billion in the banks. This acts to lower the equilibrium interest rate by 2 percent. 2- 20 40 60 80 100 120 Planned investment (billions of dollars) 0.8, then the this Fed action will Refer to Scenario 13.1.If the marginal propensity to consume increase real GDP by Interest Rate (percent)

Refer to the money demand curve. Given the money demand curve, Mp, an increase in the quantity of money demanded from Mo to M, can be caused by O A. an increase in the price level. O B. decrease in the rate of interest. O C. an increase in the rate of interest. O D. a decrease in the price level. Mp Mo Quantity of Money M1