Choose the best response for each of the following statements. a. When the Federal Reserve makes an open market purchase, the Fed: buys bonds from the public, which decreases the money supply. sells bonds to the public, which decreases the money supply. sells bonds to the public, which increases the money supply. buys bonds from the public, which increases the money supply. b. If the Fed wants to increase interest rates, it should make an . This would the money supply and achieve the increase in interest rates.

David consumes two things: gasoline (g) and bread (b). david's utility function is u(g, b) = 10g^0.25 b^0.75. use the lagrange technique to solve for david's optimal choices of gasoline and bread as a function of the price of gasoline, p_g, the price of bread, p_b, and his income m. with recent decrease in the price of gasoline (maybe due to external shock such as shale gas production) does david increase his consumption of gasoline? for david, how does partial differential g/partial differential p_g depend on his income m? that is, how does david's change in gasoline consumption due to an increase in the price of gasoline depend on his income level? to answer these questions, find the cross-partial derivative, |partial differential^2 g/partial differential m partial differential p_g.