Question

Suppose the economy is in equilibrium in the first period at point​ (a). in the second​ period, the economy reaches point​ (b). we would expect the federal government to pursue what type of policy in order to move ad 2ad2 to ad subscript 2 comma policyad2, policy and reach equilibrium​ (point

c.in the second​ period?

Answer 1

Open market purchase of government securities

Step-by-step explanation:

Base on the scenario been described in the question, we can see that the economic was in equilibrium in the first period, and in the second period it reaches a point, we would expected to use a open market purchase of government securities in the second period since it reaches a point. Because it is in second period the Fed are likely to pursue in order to move AD 2AD2 to AD Subscript 2 comma policyAD2, policy and for it to reach equilibrium.