Suppose the current money supply

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1. Suppose the current money supply is $10,000. The required reserve ratio is 0.5. The Fed wants to increase the money supply by $1,000. Determine the following:

All underlying work must be shown

a. The size of the money multiplier

b. What open market operation the Fed would have to take to achieve the stated desired change in the money supply.

d. How much should the Fed buy or sell in the government bonds to achieve the stated desired change in the money supply.

e. What would the money supply in the economy as the result of the Fed action be?

Reference no: EM13798653

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