Assume that the money supply consists entirely of bank deposits and is $1 trillion (10^12).The reserve requirement of the central bank is 10%.

a.How large are bank reserves?

b.The central bank wants to raise interest rates because it thinks Y is close to potential GDP.Suppose it wants to use open market operations.What will it do to change the money supply by 5%?(Your answer is a number.)Explain.

c.Suppose it conducts monetary policy by changing the reserve requirement (R).What change in R will change the money supply by 5% in the right direction?