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In chapter 25 we see the process of how monetary policy affects the overall economy. The...

In chapter 25 we see the process of how monetary policy affects the overall economy. The transmission mechanisms show the variables that change when the Fed takes action. Without identifying the 9 channels by name, identify the variables that change when the Fed initiates policy. Then explain how changes in these variables affect aggregate demand. Finally, explain what happens to real GDP. Look at this as a chain reaction. In your answer assume the Fed initiates an expansionary monetary policy action.

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Rahul Sunny answered 2 years ago
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