A. According ti mainstream macroeconomic, one appropriate response to a financial crisis is for the Fed. reserve to decrease the money supply.

1. is the above statement True or F?
2. Support your response in (1) by answer:

What kind of monetary policy tool thee Fed would use to combat a financial crisis?

Describe what is the effect to the Federal funds rate and the short-term interest rates?

Describe how open market operation will affect bank reserves, federal funds rate, bank loans, money supply, and aggregate demand in the economy with your respond in (1).

B. Is the Fed conducting contractionary or expansionary monetary policy in respondse to the most recent economic events? Explain briefly the challenges that our economy is facing with the current monetary policy.