1.Recessions and Interest Rates. The economy starts to head into a recession. Using a graph of the money market, show what happens to interest rates. What happens to bond prices? 2. A Decrease in the...

1.Recessions and Interest Rates. The economy starts to head into a recession. Using a graph of the money market, show what happens to interest rates. What happens to bond prices?

2. A Decrease in the Riskiness of the Stock Market. If investors began to think that the stock market is becoming riskier, how will this belief affect the speculative demand for money? Would this more likely affect M1 or M2?

3. Should the Fed Buy Stocks? Could the Fed purchase a wide variety of stocks in the market in order to raise the price of stocks? Do you see any potential problems with this policy?