Question 1 Does inflation, which is an increase in the price level, affect the three functions of money? If so, how?Question 2 a) Which of the three Federal Reserve Bank's tools would you use to fight inflation? b) How should it be use to fight inflation? c) How would it slow down inflation?Question 3 6 p Suppose bankA's total reserve (R) increased by $68,900,950. If required reserve ratio for the banking system is set at 5.9%, [0.059], a. Calculate bank A's excess reserve. $ b. By how much will total money supply change if bank A, and all subsequent banks, are able to lend out all their entire $56,800,000 excess reserves? $ Question 4 10 p Show graphically that the more interest insensitive the investment demand curve is, the less likely it is that monetary policy will be effective at changing Real GDP.Question 5 8 pts Explain, under a flexible exchange rate regime, if each of the following events cause Japanese yen to appreciate or depreciate against the dollar: (a) Japanese inflation rate rises relative to the U.S. inflation rate: Will Japanese yen appreciate or depreciate? (b) An increase in U.S. GDP relative to Japanese GDP: Will Japanese yen appreciate or depreciate?Question 6 4 pts How is supply of one currency (euro) in the exchange market related to demand for some other currency? Question 7 4 pts Bond prices and the interest rate are inversely related. Explain how a decrease in the money supply will affect interest rates in money market, and bond prices in the bond market