The money supply-interest rates and aggregate demand

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Suppose that you are a member of the Board of Governors of the Federal Reserve System. The economy is experiencing a sharp and prolonged inflationary trend. What changes in (a) the reserve ratio, (b) the discount rate, and (c) open-market operations would you recommend?

Explain in each case how the change you advocate would affect commercial bank reserves, the money supply, interest rates, and aggregate demand.

Reference no: EM131159673

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