Essentials of Economics 2nd Edition by Campbell McConnell, Randy Grant, Stanley Brue

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) the discount rate, (c) open-market operations, and (d) the amount of reserves offered at the term auction facility 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.