A. Monetary Policy involves changing the money supply. In the United States, Monetary Policy is implemented by the. 1. taxes and government spending
2. the design of currency
3. exports
4. Federal Reserve
5. President and Congress
6. Secretary of the Treasury/ states.
b. can be used to address a Recessionary Gap; while can be used to address an Inflationary Gap.
1. Contractionary Monetary Policy
2. Lower prices
3. Expansionary MonetaryPolicy
4. Larger coins
5. smaller coins
6. higher prices
c. To enact Contractionary Monetary Policy, the central bank will bonds. This the amount of cash in the economy. This will cause bond prices to and interest rates to . The change in interest rates causes investment and consumption to shifting .
1. fall
2. stay the same
3. rise,
4. Short-Run Aggregate Supply
5. Aggregate Demand
6. Long-Run Aggregate Supply
7. Outward
8. inward
9. buy
10. sell
11. increase
12. decrease

In the United States, Monetary Policy is implemented by the - 4. Federal Reserve

The Federal Reserve of the United States is in charge of implementing the Monetary Policy of the country. It is also in charge of regulating the financial industry, and acting as lender of the last result to prevent financial crisis.

3. Expansionary MonetaryPolicy - can be used to address a Recessionary Gap

During times of economic downturn, monetary policy tends to be expansionary: expanding the money supply to lower the interest rate, so that investment becomes cheaper, and the economy reactivates.

1. Contractionary Monetary Policy - can be used to address an Inflationary Gap.

When the money supply is too high, or has grown too fast, inflation often starts. For this reason, the fed usually implements contractionary monetary policy (less money supply, higher interest rate), in order to keep inflation from increasing.

c. To enact Contractionary Monetary Policy, the central bank will - sell bonds

When the fed sell bonds, it takes money from the market, reducing the money supply.

This - reduces - the amount of cash in the economy.

As explained above.

This will cause bond prices to - fall - and interest rates to - rise

The change in interest rates causes investment and consumption to - fall

shifting - Aggregate Demand

Contractionary monetary policy will cause interest rates to rise, making investment more expensive, and causing price hikes, this will reduce consumption.

This in turn will shift the Aggregate Demand curve to the left or inward.

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