Assignment 2: The Multiplier EffectThis release also states that the Federal Res

Assignment 2: The Multiplier EffectThis 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 Reserves 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 2 pages).By Wednesday January 29 2014 submit your responses to the M4: Assignment 2 Dropbox.