Solved: Commercial bank reserves and money supply, Macroeconomics

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Commercial bank reserves and money supply

Question:

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: 1- reserve ratio, 2- discount rate, 3- 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.

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Macroeconomics: Commercial bank reserves and money supply

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