Assume you are in the Federal Reserve who can control the monetary policy.
- Briefly describe the FOMC.
- Define the mechanism of Federal Open Market Operation
- Describe and define the equilibrium of money market. Illustrate the money supply curve and money demand curve. Denote vertical and horizontal axis as well as each graph.
- The Federal Open Market Committee has decided that the federal funds rate should be 2% rather than the current rate of 1.5%. What is the appropriate open market action regarding Treasury bills? Show and explain on the graph.