Central Bank and Money Supply (30 marks).

a. The Central Bank makes open market purchase of 100 million. Based on the money multiplier model, demonstrate the money supply process in Excel. Assume the required reserve ratio is 25%, the currency ratio is 25%, and the excess reserve ratio is 20%. (10 marks) (Please conduct the calculation in Excel and copy the table here.)

b. What is the total amount of increased money supply? What is the total amount of increased monetary base? What is the ratio between increased money supply and increased monetary base? (5 marks)

c. Use the formula = (1+)/( ++) to calculate the money multiplier. Does it have the same value as the ratio calculated in sub-question b? If not, how would you like to make adjustment so that those two can be matched? (15 marks)