What action could the Fed take to close a contractionary gap that resulted from a decrease in aggregate demand?    

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The Fed is the popular name for the Federal Reserve.  This is the central bank for the United States.  The Fed is in charge of the monetary policy for the United States.  Therefore, the actions that it can take are those types of monetary policy that lead to increases in aggregate demand.

There are three main types of expansionary monetary policy.  All of them are intended to increase...

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