Define the mechanism of federal open market operation

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Reference no: EM131895217

Assume you are in the Federal Reserve who can control the monetary policy.

  • Briefly describe the FOMC.
  • Define the mechanism of Federal Open Market Operation
  • Describe and define the equilibrium of money market. Illustrate the money supply curve and money demand curve. Denote vertical and horizontal axis as well as each graph.
  • The Federal Open Market Committee has decided that the federal funds rate should be 2% rather than the current rate of 1.5%. What is the appropriate open market action regarding Treasury bills? Show and explain on the graph.

Reference no: EM131895217

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