Bank reserves, the money supply, interest rates, and aggregate demand
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.