Monetary policy implementation
2. Suppose that the Federal Reserve sells $5 million worth
of government securities to General Motors. What is the effect on the quantity
of bank reserves?
3. “When the Fed increases the legal reserve
requirements, it loosens credit, because the banks have more reserves,”
Comment and evaluate.
4. If the Federal Reserve buys $500 million worth of
government securities, does this tend to shift the aggregate demand curve tot
he right? To the left? Explain.