Excess supply of money or excess demand for money

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Suppose the money supply is $1 trillion. The FOMC decides to use open market operations to reduce the money supply by $100 billion. If the required reserve ratio is .05, what does the Fed need to do to accomplish the reduction? Illustrate your results graphically in the money market, and explain how equilibrium is restored. (Does the Fed action result in (an excess supply of money or an excess demand for money? What happens to the interest rate?)

Reference no: EM131377240

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