Question

The Federal Reserve has the difficult task of often having to meet goals that may be mutually exclusive when making policy. For example, the Fed is currently worried about both the slow growth in 2016 being a precursor to another recession and worried that a continued low interest rate will ultimately have negative effects in the economy. Assume the Federal Reserve has hired you to graphically evaluate two polices for them:
a.   Graphically show the effect in the money market of a lowering the RRR.
b.   Graphically determine how a bond selling imitative would affect the value money noting any inflation or deflation found in the market as a specific location on the graph.

Answer 1