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1.Describe the effect each action below will have on the money supply. Explain your reasoning. A. The Fed raises the discount rate from 5% to
1.Describe the effect each action below will have on the money supply. Explain your reasoning.
A. The Fed raises the discount rate from 5% to 10%.
B. The required reserve ratio is lowered from 20% to 10%.
C. The Fed sells $5 billion worth of T-bonds on the open market.
D. The Fed buys $5 billion worth of T-bonds on the open market.
E. Banks decide to keep more of their assets as reserves in order to avoid risking a shortage of the required reserve.
2.How does an expansionary monetary policy promote economic growth in the economy?
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