Suppose that each 0.1-percentage-point increase in the equilibrium interest rate induces a $5 billion decrease in real
Question:
a. How much must real planned investment decrease if the Federal Reserve desires to bring about an $80 billion decrease in equilibrium real GDP?
b. How much must the money supply change for the Fed to induce the change in real planned investment calculated in part (a)?
c. What dollar amount of open market operations must the Fed undertake to bring about the money supply change calculated in part (b)?
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