(a)If the stock of high-powered money in the economy is $117.2 billion; the reserve ratio is 12% and the fraction of deposits held as currency is 5%, calculate

(i)the size of the money multiplier (provide answer to two-decimal points).

(ii)the money supply (provide answers to two-decimal points).

(b)Identify and illustrate the two components of money demand. Explain in detail the reasoning behind the slopes (shape) of the two components of money demand.

(c)Using the money market, illustrate what happens if income in the economy decreases.

(i)Assume the central bank responds to the decrease in economic activity by undertaking expansionary policy. Illustrate the impact on the money market.

(ii)Explain how the expansionary policy in part (i) should transmit into the product market and boost economic activity.

(iii)If the domestic economy slides into a recession as a result of the COVID-19 crisis, will the above policy action work? Why? Why not?Explain in detail.