Explain how each of the following events affects the monetary base, the money multiplier, and the money supply. The Federal Reserve buys bonds in an open-market operation. The Fed increases the interest rate it pays banks for holding reserves. The Fed reduces its lending to banks through its Term Auction Facility. Rumors about a computer virus attack on ATM machines increase the amount of money people hold as currency rather than demand deposits. The Fed flies a helicopter over 5th Avenue in New York City and drops newly printed $100 bills.
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Explain how each of the following events affects the monetary base, the money multiplier, and the mo...
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