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4. Assume that the reserve requirement is 20%. Also assume that banks do not hold excess reserves and there is no cash held by the
4. Assume that the reserve requirement is 20%. Also assume that banks do not hold excess reserves and there is no cash held by the public. The Federal Reserve decides that it wants to increase the money supply by $35 million. (a) If the Fed uses open-market operations, will it buy or sell bonds? (b) What quantity of bonds should the Fed buy or sell to accomplish their goal? Show your work
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