1. Suppose the regulators decide to lower the cash reserve ratio for the commercial banks. What effect this regulatory step will have on the money supply, inflation, GDP and employment? Carefully articulate your answer. Provide graphs in support of your argument wherever possible.

2. Suppose the Federal Reserve decides to engage in massively large bond purchase operations. Hundreds of billions of dollars are going to be spent in buying government and private bonds from the open markets. What effect this policy will have on the money supply, inflation, GDP and employment? Carefully articulate your answer. Provide graphs in support of your argument wherever possible.

3. Suppose the Federal Reserve decides to increase the capital requirement for the commercial banks. What effect this regulatory requirement will have on the money supply, inflation, GDP and employment? Carefully articulate your answer. Provide graphs in support of your argument wherever possible.