Problem
1. There are several tools the Fed uses to implement monetary policy.
a. Briefly describe these tools.
b. Explain how the Fed would use each tool in order to increase the money supply.
2. First Bank has total deposits of $2,000,000 and legal reserves of $220,000.
a. If the reserve requirement is 10 percent, what is the maximum loan that First Bank can make, and what is the maximum increase in the money supply based on First Bank's reserve position?
b. If the reserve requirement is changed to 5 percent, how much can First Bank lend, and how much can the money supply be expanded?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.