PLEASE SHOW ALL WORK

a) consider the bank balance sheet for the country of Riqueza that currently has 1,800 million escudos in its money supply 1,100 million of which is backed by domestic government bonds; the rest of it is backed by foreign exchange reserves. Assume that Riqueza maintains a fixed exchange rate of 2 escudos per dollar the foreign interest rate remains unchanged and money demand takes the usual form M i P = L(i)Y. Assume that prices are sticky and the central bank keeps domestic credit unchanged whenever possible

i) show Riquezas central bank sheet. Use appropriate units

ii) now suppose there is an economic downturn in Riqueza so that real income contracts by 10%

a) how will the downturn affect the central banks ability to defend the fixed interest rate

B) how can the central bank of riqueza maintain peg after the economic downturn

c) on a new balance sheet show how the downturn affects Riquezas central bank

d) on a central banks balance sheet diagram label the following: initial money supply, money supply following the economic downturn, initial domestic credit, and domestic credit following the economic downturn, initial reserve of foreign asset, and reserve of foreign asset following the economic downturn in Riqueza