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11 July, 17:48

Suppose the economy is in short-run equilibrium above potential GDP, the unemployment rate is very low, and wages and prices are rising. Using the static AD-AS model, the correct Fed policy to move the economy from the short - run equilibrium back to long-run equilibrium would be

an open market purchase of Treasury securities (bonds).

a decrease in reserve requirements.

an open market sale of Treasury securities (bonds).

a increase in taxes.

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Answers (1)
  1. 11 July, 19:16
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    an open market sale of Treasury securities (bonds).

    Explanation:

    An open market sale will decrease the money supply so aggregate demand decreases and shifts to the left.
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