Question: Ye = 500 +.9(Y-500) + 600 + 1000 Yf = $13,000 To get the economy to full employment, the Federal Open Market Committee decides to

Ye = 500 +.9(Y-500) + 600 + 1000

Yf = $13,000

To get the economy to full employment, the Federal Open Market Committee decides to conduct an open market operation.

Assume that for every 1% change in the interest rate, business investment chabges by $175. Assume that for every $100 in bonds that the FED buys/sells, the interest rate changes by 1%.

Should the FED buy or sell UST bonds?

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