Macroeconomics 2nd Edition by Campbell McConnell ,Stanley Brue,Sean Flynn

Exercise 6

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) die discount rate, and (c) open-market operations would you recommend? Explain in each case how die change you advocate would affect commercial bank reserves, the money supply, interest rates, and aggregate demand.