1. a,b,c Money Macroeconomics, all calculations and formulas

1. [Money] You have been recently hired as the head ofthe CMC central bank. In order to get a better sense of the CMC economy you start to collect some data and find the following: The monetary base is $1,000. The currency-deposit ratio is 17%. The reserve-deposit ratio is 72. The velocity of money is 2. Total output Y is $2,000. The nominal interest rate is 10 percent. Note: Assume that prices are exible and we are describing the long run a. What is the money multiplier, the money supply, and the price level? (6 pts) b. With the rise of electronic forms of payment, the citizens of CMC decide to hold less currency and the currency-deposit ratio falls to 1/3. How does this affect the money supply and the price level of the CMC economy? Briefly explain the intuition behind the result. (6 pts) c. Now imagine you want to keep the price level the same as it was in part (a). Assuming you use monetary policy as your tool, how many bonds should you buy or sell to accomplish this goal? (5 pts)