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ps5key - Economics 102 Kelly Fall 1999 Homework#5 Due Dec...

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Economics 102: Kelly Student name: Fall 1999 ID#: Homework #5 T.A. Name: Due Dec. 14 at large lecture Sec. Code: Answer Key Note: If asked to graph please use ¼ graph paper. Label this paper with your name, id#, TA name, and the number of your discussion section. If you need additional paper label it similarly. All homework paper should be stapled together. There will be no stapler at the large lecture hall. Please Xerox your homework so that you can compare your answers to the answer sheet. Part I Problem #1. In doing this problem assume there are no currency drains and that excess reserves equal zero. (a) (1 point). The FED sells $2000 T-bills on open market operations. Does the money supply increase or decrease? What will be the total change in the money supply if the required reserve ratio is 20% of demand deposits? Decreases, –10000 (b) (1 point). The FED buys $1000 T-bills from a bank in New York. Does the money supply increase or decrease? What will be the total change in the money supply if the required reserve ratio is 20% of demand supply? Increases, 5000 (c) (1 point).
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