3. As a policy advisor, explain how you would use ths OMO to secure 3-5% economic growth and reduce unemployment in an economy in slight recession?

B. Describe the possible unintended consequence to your policy actions.

2. Imagine that the banking system received additional deposits of $100 million and that all the individual banks wish to retain their current liquidity ratio of 20%.

A. How much od the $100 million will banks choose to lend out initially?

B. What will happen to banks liabilities when when the money that is lent out is spent and the recipients of it deposit in their bank accounts?

C. How much of these latest deposits will be lent out by the banks?

D. By how much will total deposits eventually have risen, assuming that none of the additional liquidity is held outside the banking sector?

E. How much of these extra total deposits are matched by (i) liquid assests, (ii) illiquid assests?

F. What is the size of the bank multiplier?

G. If one half of any additional liquidity is held outside of the banking sector, by how much less will deposits have risen compared with (d) above?