1.In the graphs below, show the shift in either demand and/or supply for real credit by drawing in a new curve. (In MS Word, use Insert/Shape, then select and draw a line.) Insert an arrow to clearly identify the shift. Below the graph, state the change, either increase, decrease, or no change in r and RC.

a. The Federal Reserve purchases $2 trillion of US Treasury debt and other debt d. Firms borrow to increase cash (increase liquidity) that will be needed during the securities in the open market. recession S S D D RC RC Answer for r and RC: R recrese RC increase Answer for r and RC: b. In a stimulus bill, the US government increases spending by $2.6 trillion to aid e. The Federal Reserve loans money directly to state and local governments households and firms. I D D RC RC Answer for r and RC: Answer for r and RC: c. The Federal Reserve lowers the required reserve ratio to zero. f. The recession ends, the federal government reduces spending and the Federal Reserve begins selling some of its Treasury debt S I S X D D RC RC Answer for r and RC: Answer for r and RC