Macroeconomics- a,b,c,d all calculations, work, formulas.

The economy has the following characteristics:

o The production function is [(1/2Ll/2 0 K = 100,L = 10000 c The monetary base is $1,000 0 The currency-deposit ratio is 1/2 c The reserve-deposit ratio is 1/3 0 The nominal interest rate is 25 percent 0 The demand for real money balances is o (2.4%) a. What is the money multiplier and money supply? (6 pts) b. What is the price level in the economy? (6 pts) c. The Fed thinks the money supply is too high and wants to lower it by one half. If the Fed uses open market operations, how many bonds does it need to buy or sell? (6 pts) d. Assume (c) never happened and the money supply is the same as what you calculated in part (a). A new Fed chair that is known for being tough on inflation is hired and expected inflation falls by 9 percent. What is the new price level? What is the brief intuition behind this result? (If you can't calculate the number, you will receive some credit for just the intuition.) (7 pts)