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Increase-decrease in money supply

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Reference no: EM1366879

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

a. What takes place to the interest rate and money supply?

b. What is the total increase or decrease in money supply which could result from the Fedâ??s action? Describe your answer.

Reference no: EM1366879

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