8. Pretend you are in charge of conducting monetary policy at the New York Fed and you have the following initial conditions.

Initial Conditions

rr/D = .10

C = 750 billion

D = 1700 billion

ER = 0

M = C + D

Given the above information (show all work on your exam sheet):

i) Calculate the MB.

ii) Calculate the money multiplier (mm).

iii) What is the money supply (use MS = mm x MB)?

NOTE: This work is to be done using theExam Sheet 2 Part 2 C.You will upload this work, along with other work to be done on this sheet, to question #12 on this exam.Enter the word "Finished" into the text box below when ready to move on.

9. If Rd= 350 - 40 iff, 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 Rs. Rsis made up of required reserves and excess reserves. Here ER=0 so to find Rs, 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.

NOTE: This work is to be done using theExam Sheet 2 Part 2 C.You will upload this work, along with other work to be done on this sheet, to question #12 on this exam.Enter the word "Finished" into the text box below when ready to move on.