[For this assignment, you will want to draw the graph with P and Y on the axes, NOT growth and inflation.]

a/ Let the money base be $500 and the required reserve ratio be 10%.Assuming the public holds no currency and the banks hold no excess reserves, what is M2?

b/ If the velocity of M2 is 4 and the long-run-equilibrium level of output is 2,000, what is the equilibrium price level?(In the long run.)

c/ Now imagine that the central bank increases the money base to $600.Show the effect of this in the long run and the short run on a graph.Make sure to include the price level that you found in part b and also any other price levels you can determine a number for. (There is one you can and one you can't with the information provided.You can just name the other one P' or something.I want to know that you know which one is which.)Assume that the public continues to hold no currency and that banks continue to hold no excess reserves.