1. Suppose the Fed decided to sell $60 billion worth of government securities on the open market.
   1. If the reserve ratio is 5%, what is the maximum potential change in the money supply? Will the money supply increase or decrease?

1. What will this sale by the Fed do to interest rates? Why?

1. Under what circumstances would the Fed be pursuing such an open market policy?

1. To obtain the same objectives in #5, should the Fed increase or decrease
   1. the discount rate?
   2. the reserve requirement?