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Draw a supply and demand curve for US government bonds. Show equilibrium. Show and explain what the effect expansionary monetary policy, using open market operations,

  1. Draw a supply and demand curve for US government bonds. Show equilibrium.
  2. Show and explain what the effect expansionary monetary policy, using open market operations, will have on this equilibrium.
  3. Show and explain what the effect of contractionary monetary policy, using open market operations, will have on this equilibrium.
  4. Explain what the Fed should do if the actual interest rate is below its target rate?Or above?

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