1) What is stabilization policy? Why is it conducted? How is it conducted? Why is it said that these policies can be destabilizing if not implemented carefully? What might cause these policies to be destabilizing?

2) The principal method the Federal Reserve uses to change the money supply is openmarket operations.Use the aggregate demand-aggregate supply model to illustrate graphically the impact in the short run and the long run of a Federal Reserve decision to engage in open-market sales when the economy is starting from its long-run, full employment equilibrium. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; v. the short-run equilibrium values; and vi. the long-run equilibrium values.State in words what happens to prices and output in the short run and the long run as a result of the Federal Reserve's action.