Problem
Suppose that the Federal Reserve wishes to keep the nominal interest rate at a target level of 4 percent. Draw a money supply and demand diagram in which the current equilibrium interest rate is 4 percent. Explain a specific policy action, except for a change in the interest rate paid on reserves, that the Fed could take to keep the interest rate at its target level if the demand for money suddenly declines.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.