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?