This 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.

Using Microsoft Word, submit your responses in the form of a short paper (1 ½ – 2 pages).