Suppose current market federal funds rate is 0 percent the, Business Economics

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Suppose current market federal funds rate is 0 percent the

Suppose current market federal funds rate is 0 percent. The interest rate on long term government bonds is 5 percent and risk premium for this bonds is 2 percent. Assume liquidity premium hypothesis and expectations hold. Explain how the Fed can boost economy in this situation if people believe Fed's announcements on it future decisions.

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Business Economics: Suppose current market federal funds rate is 0 percent the

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