Assignment 2: The Multiplier Effect;Go to the Federal Reserve?s Web site at http://www.federalreserve.gov/.;Place the words ?FOMC meeting 2009? in the search section of the site.;Select the link for the article termed ?FRB: Press Release?FOMC statement?December 16, 2009.? 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.;Such 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 Reserve?s 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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