Answer each of the following separate parts. You are required to draw a graph or a diagram for each part.

(a)Suppose you deposit some money into bank A. The required reserve ratio is 5%.

Draw a diagram to illustrate how this initial deposit would increase the money supply for the entire economy. The diagram should illustrate at least 3 rounds of deposits and 2 rounds of loans. (You should not draw a table or a graph.)

(b)The Federal Reserve wants to decrease money supply by conducting an open market operation. Draw a diagram to illustrate the open market operation. Your diagram should also show the decrease of interbank loans. (You should not draw a table or a graph.)

(c)The prices of production materials decrease temporarily. Draw an AD-AS graph to show the effects in short run and in long run. (d)Due to a substantial increase in consumer confidence, the economy is now overheating. The government conducts a contractionary fiscal policy. Draw an AD-AS graph to show how the policy brings the economy back to full-employment output.