Scenario 3: In Country X, the required reserve ratio is 10 percent. Assume that the central bank sells $100 million in government securities on the open market. a) What type of monetary policy has this country's central bank adopted? b) Using a correctly labeled graph of the money market, show the impact of the central bank's bond sale on the nominal interest rate. c) What is the impact of the central bank's bond sale on the price level (inflation)? d) As a result of the price level change in part (c), are people with fixed incomes better off, worse off, or unaffected? Explain. Scenario 6: The United States has recently experienced many years of disinflation as measured by CPI. This causes people's real income to rise and they begin holding less money in liquid form and investing in financial assets. a) Draw a correctly labeled graph (A) of the money market and show the impact on the demand for money and the nominal interest rate. Graph A Graph B b) Suppose the Fed wants to increase inflation. What open-market operation should they engage in to reverse their initial policy? c) Show on a second correctly labeled graph (B) of the money market the FED's decision in the previous question. d) Based on the Fed's decision, what would happen to the price levels? Loanable Funds Problem Sets Topic: Stocks and Bonds 1. What is a stock? 2. What is a bond? 3. Explain how a stock and bond differ from one another