Explain the pros and cons of using a change in open market operations to achieve the desired increase in output. Be sure to thoroughly explain how the change will affect equilibrium prices, output, and unemployment.

Monetary policy is used by the central bank to stabilize the output and price level in the economy. To increase the output, the central bank uses an expansionary monetary policy that is open market operation. Under this, the central bank buys government securities from the public that in turn, increase the money supply in the market.

Expansionary open market operations have both pros and cons; some of its pros are:

• Increase in money holding by people will lead to an increase in demand for goods and services that further lead to an increase in the output.
• Expansionary open market operation promotes employment opportunities.
• Increased demand and supply leads to higher economic growth.

Some of its cons are:

• It will lead to demand-pull inflation in the market due to increase in money holding.
• Inflation increases the price of the product and the cost of the factor of production.
• To decrease the cost, firms try to reduce their labor force which leads to unemployment in the market.