Question 2 is attatched. Asking for an answer for question 3 QUESTION 2Suppose that for every open-market operation in the amount of $1, money supply increases by $3, i.e., an open-market purchase of $1 will increase money supply by $3and an open-market sale of $1 will reduce money supply by $3. This means that money multiplier is fixed and is equal to 3. The Fed's balance sheet isFederal Reserve BankAssetsLiabilitiesSecuritiesGold$ 900$ 700Currency held by nonbank publicVault cash held by banksReserve depositsTotal liabilities100100200Total assets$1000$1000and the commercial banks' balance sheet isConsolidated Balance Sheet of BanksAssetsLiabilities$ 100Deposits$3000Vault cashReserve depositsLoansTotal assets2002700$3000Total liabilities$3000If the Fed wants to increase money supply by 15%, then it has to buy government bonds in the amount ofNote: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were enteredincorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete itand you should not do anything about it. In case of percentages, do not type in the percentage symbol "%". If your answer is a negative number, type a dash in front ofyour answer, i.e, "-999.99". QUESTION 3Consider the economy described in question 2. If the Fed sells $50 of government bonds than money supply willO A. increase by 1.36%B. decrease by 1.36%C. increase by 4.05%D. decrease by 4.05%

The money supply can be defined as a measurement of the total amount of money in circulation. The…

Answered: Consider the economy described in…

Consider the economy described in question 2. If the Fed sells $50 of government bonds than money supply will A. increase by 1.36% B. decrease by 1.36% C. increase by 4.05% D. decrease by 4.05%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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