Suppose the Fed decided to sell $200 billion worth of government securities in the open market (assume all payments are are directly deposited into or withdrawn from the banking system). What impact would this action have on the economy? Specifically, answer the following questions: Instructions: Enter your responses as a whole number. If the lending capacity or aggregate demand falls be sure to include a negative sign (-) with your answer. a. How will M1 be affected initially? multiple choice 1 decrease by $200 billion not enough information to answer no initial change to M1 increase by $200 billion b. By how much will the banking system’s lending capacity change if the reserve requirement is 10 percent? $ billion c. How must interest rates change to induce investors to utilize this change in lending capacity? Interest rates must (Click to select) . d. By how much will aggregate demand initially change if investors change their behavior because of this change in available credit? $ billion e. Under what circumstances would the Fed be pursuing such an open market policy? multiple choice 3 recession expansion f. To attain those same objectives, what should the Fed do with the (i) Discount rate? multiple choice 4 increase decrease (ii) Reserve requirement? multiple choice 5 decrease increase