Let us pretend that you are the director of monetary affairs fer the Fed and you just got authority to pay interest on excess reserves. The initial conditions in the reserve and money markets, before the authority was granted are as follows: rr = .1tIl| C = 200 D = 4WD ER = {ID a} {5 points} Show all of your work. i} |Salculate the MB. ii} Calculate the money multiplier. iii} What is the money supply (use mm x lle to calcuiate this}? b} {4 points) If Rd = 420 - 5D i, given the information above. what is the market clearing federal funds rate? Show all of your work Draw a reserve market diagram depicting exactly what is going on here! Label this initial equilibrium point as pointA. (1D points for correct and completely labeled diagram} c} (11] points} So you get this authority and decide. along with the FDMC. that the most appropriate rate to pay on excess reserves would be 5D basis points [0.5ffu}. Given these new conditions: explain what would happen reserve demand and why. You don't need to derive an expression for reserve demand, just explain what would happen to reserve demand and the market clearing federal funds rate and why [be specic and make sure you convey to me that you know how this 'tool' works!) Depict this development on your reserve market diagram