Assume the monetary base is $100, the currency ratio is 0.5, the require reserve ratio is 0.1, and the excess reserve ratio is 0.1.

a. Calculate the money multiplier and the money supply.

b. Suppose the currency ratio rises to 1.0. If the Fed holds the monetary base constant, calculate the money multiplier and the money supply.

c. Suppose the Fed wants to keep the money supply constant at the level found in part (a). How must it adjust the monetary base when the currency ratio rises?