Explain the linkages in the causal chain when the Fed conducts a contractionary monetary policy. Explain how the FED would use the THREE tools available for Monetary policy. Make sure you include all 5 steps outlined below.

1) List the three tools and how specifically they would change.

2) How the actions stated above would affect the money supply.

3) How this change in the money supply will affect the interest rate.

4) How #3 will affect the rate of investment.

5) How this will affect real GDP/AD