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Name: Econ 202 - Principles of Macroeconomics Chapter 16(29) Homework Problems - The Monetary System 1. What is the difference between commodity and fiat money?

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Name: Econ 202 - Principles of Macroeconomics Chapter 16(29) Homework Problems - The Monetary System 1. What is the difference between commodity and fiat money? 2. Who is responsible for setting monetary policy in the United States? 3. What is the difference between a reserve ratio and a reserve requirement? 4. Explain whether each of the following will increase or decrease the money supply: a. The Fed buys bonds in open-market operations b. The Fed reduces the reserve requirement c. The Fed increases the interest rate it pays on reserves d. Citibank repays a loan it had previously taken from the Fed e. People start holding less cash f. Banks decide to increase their excess reserves 5. If banks hold 20% as reserves, what is the effect of the Fed selling $1 million of government bonds on the money supply

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