a. Consider a standard IS/LM money market where c0=10, c1=1; c2= 8, Y = 100, Ms = 80 (Focus only on the money market). Find equilibrium r.

b. Consider the market for reserves such that Qr = ff0 -ff1*FFR where ff0 = 10, ff1 =100, Qr = 5. Find equilibrium FFR.

c. Suppose the Fed wants to lower r to 2.5. Assume standard deposit multiplier holds (rr=10%). What action must the fed take in terms of buying/selling bonds to PDs. Provide a specific value for reserves and FFR.

d. Can you identify the special case when a change in monetary base worth X dollars would lead to the same equivalent change in money supply of X dollars? What does that mean and is that practical economically?