2. The reserve requirement is 20% and the FED buys 200 billion dollars of government
securities. What is the maximum expansion possible in the money supply?
3. Explain how the change in the money supply in question 2 works its way through the
economy to affect employment, inventories, GDP, and interest rates. Be sure to explain the
causality chain, not just what happens to each variable.

Fabian inherited some money from his family and decided to open a hardware store on his own. he bought the entire inventory on credit from vendors with the promise of paying them later. he hoped to have good sales when he opened the store because there weren't any other hardware stores in the area. however, he couldn't sell most of his stock because there did not seem to be any demand. he knew he wouldn't be able to pay the creditors from the money the store made. what kind of ownership does fabian have over his store? what kind of liability is fabian open to regarding the money owed to his creditors?