Assignment 2: The Multiplier Effect1.Go to FRB: Press ReleaseFOMC statementDecem

Assignment 2: The Multiplier Effect1.Go to FRB: Press ReleaseFOMC statementDecember 16 2009.2. You should now find a press release from the Board of Governors of the Federal Reserve System dated December 16 2009 which discusses the decisions of the Federal Open Market Committee (FOMC) for that date.This release also states that the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. Additionally the release states that the FOMC has decided to gradually reduce the pace of such Fed purchases. Discuss why you believe that the FOMC has made such a decision and explain the consequences of such a decision on the economy.In your answer discuss the Federal Reserves use of open-market operations to influence the money supply and the respective consequences of such actions. Include a discussion of the money multiplier effect in your response. Justify your conclusions and provide appropriate examples.

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