Answer the following questions using the supply and demand analysis of the market for reserves.

(a) Why is it that a decrease in the discount rate does not normally lead to an increase in borrowed reserves?

(b) Suppose that a central bank has just lowered the discount rate. Does this signal that the central bank is moving to a more expansionary monetary policy? Why or why not?

(c) Using the supply and demand analysis of the market for reserves, indicate what happens to the equilibrium market rate, borrowed reserves, and non-borrowed reserves if
i. The economy is unexpectedly strong, leading to an increase in the amount of bank deposits;
ii. Banks expect an unusually large increase in withdrawals from deposit accounts in the future;
iii. The central bank raises the target rate;
iv. The central bank raises the interest rate on reserves above the current equilibrium market rate;
v. The central bank reduces reserve requirements;
vi. The central bank reduces reserve requirements, and then conducts an open market sale of securities.