Explain how the Fed’s use of its three tool of monetary policy affect supply and demand.

Answer each of the 2 essay questions below with a response that is at least 300 words in length. The total submission for this week should be 600 words in length.

1. Explain how the Fed’s use of its three tool of monetary policy affect supply and demand in the market for reserves and the equilibrium federal funds interest rate.

2.Explain why banks, which would seem to have a comparative advantage in gathering information, have not eliminated the need for the money markets

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