Identify an open-market operation federal reserve could use

Reference no: EM13221605

An increase in credit card fees causes people to use credit cards less often for transactions and demand more money.

(a) Using a correctly labeled graph of the money market, show how the nominal interest rate will be affected.

(b) Given the interest rate change in part (a), what will happen to bond prices in the short run?

(d) Identify an open-market operation the Federal Reserve could use to keep the nominal interest rate constant at the level that existed before the drop in credit card fees. Explain.

Reference no: EM13221605

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