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when the fed sells __________ , it is employing __________ monetary policy. this causes interest rates to rise, which decreases __________ activity. consequently, __________ decreases in the short run, causing a __________ in the real gdp and – .

Sagot :

It should be noted that in a situation where the Fed sells securities, it's employing the contractionary fiscal policy.

A contractionary fiscal policy is used when the gross domestic product is growing too fast. It uses to curb inflation.

Contractionary monetary policy leads to a decrease in the money supply in the economy and causes interest rates to rise. This decreases expenditure activities.

Consequently, demand decreases in the short run causing a reduction in the real GDP.

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