ii) Calculate the money multiplier (mm). iii) What is the money supply (use MS = mm x MB)? Table for Individual Question Feedback Points Earned: 5.0/5.0 Upload File
10. If R d = 300 - 40 i ff , given the information above, what is the market clearing federal funds rate? Assume that this is the target for the federal funds rate. Show all work. NOTE: To calculate the market clearing federal funds rate, you first need R s . R s is made up of required reserves and excess reserves. Here ER=0 so to find R s , take the value for rr/D and multiply it by the value for D. Then you will be able to solve for the market clearing federal funds rate. In the space on your exam sheet, draw a reserve market diagram depicting exactly what is going on here! Label the equilibrium point as point A. Table for Individual Question Feedback Points Earned: 5.0/5.0 11. Suppose that due to whatever reason, reserve demand changes and you forecast the reserve demand to now be Rd= 260 - 40 iff. In order to keep the federal funds rate at target, what must the open market desk do? Be specific and show this development in your picture on your exam sheet (label the new equilibrium as point B).Table for Individual Question Feedback 12. Suppose the alternative, that the open market desk does nothing different, that is, they hold the amount of reserves constant. What happens in the reserve market? What is the market clearingfed funds rate now? Label this development, that is, the new equilibrium as point C. Be sure to show all work.Table for Individual Question Feedback
13. Upload your exam sheet for Part 2 here. A correct and completely labeled diagram is worth 10 points. 2A.jpeg Table for Individual Question Feedback Points Earned: 10.0/10.0 14. Let's go back to the fall of 2008 when we were at the height of the financial crisis. Pretend you are steering the cruise ship and your goal is to keep interest rates steady in the money market. For simplicity, we hold the price level fixed at 1 and assume that inflationary expectations are fixed at 2%.