Question

What would be the​ Fed's reaction if actual real GDP in 2006 occurs at point B and potential GDP occurs at LRAS 06​? That​ is, what step will the Fed likely take to control inflation in the second​ period?

Answer 1

An open free market sale of government securities.

Step-by-step explanation:

The answer of the Federal Reserve (Fed) would be to sell government securities in order to equilibrate and control the money supply. When the Federal Reserve is buying and selling the government securities in the free market what it is done, is to increase or decrease the amount of money in the banking system.