11. Explain how the Open Markets Committee (FOMC) contracts and expands the monetary base. Include the following in your answer:

a) What are open market operations and how do they work?

b) How does this action impact money supply and the economy? c) What is the deposit multiplier and what is its formula?

d) Give the formula for the impact of Fed purchases or sales on the money supply.

e) What is the money multiplier and what factors determine the impact open market operations on the money supply in the economy? Be sure to distinguish how this is different from the deposit multiplier.