Question 1: Suppose that the Federal Reserve sells $5 million worth of government securities to General Motors. What is the effect on the quantity of bank reserves?
Question 2: "When the Fed increases the legal reserve requirements, it loosens credit, because the banks have more reserves," Comment and evaluate.
Question 3: If the Federal Reserve buys $500 million worth of government securities, does this tend to shift the aggregate demand curve to the right? To the left? Explain.