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Suppose the Fed decides to buy $1 billion in Treasury bonds from the public. Assume that the reserve requirement is 10%. 1a. Draw a clearly-labeled

Suppose the Fed decides to buy $1 billion in Treasury bonds from the public.

Assume that the reserve requirement is 10%.

1a.Draw a clearly-labeled graph that shows the original and the new equilibrium inthe money market.

1b.What happens to the interest rate and the money supply?

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