Question Set Three: 1. Bank A has a checkable deposit of $10000 and $2000 reserved at the Fed. If requals 20%, is Bank A reserve deficient? 2. Complete the following table by writing up or down in an effect on the money supply column: Effect on the Money Federal Reserve Action Supply (up or down?) Lower the discount rate Conduct open market purchase Lower required reserve ratio Raise the discount rate Conduct open market sale Raise the required reserve ratio Question Set Four: 1. If reserves increase by $2 million and the required reserve ratio is 5%, what is the change in the money supply? 2. Suppose bank A borrows reserves from bank B. Now that bank A has more reserves than previously, will the money supply increase? Explain your answer. Question Set Five: 1. If reserves decrease by $4 million and the required reserve ratio is 6%, what is the change in the money supply? 2. According to Simple Quantity Theory of Money, what is the change in price level if money supply increases by 20% from $500 and both velocity and quantity are constant, at 2 and 100 respectively? Question Set Three: 1. Bank A has a checkable deposit of $10000 and $2000 reserved at the Fed. If requals 20%, is Bank A reserve deficient? 2. Complete the following table by writing up or down in an effect on the money supply column: Effect on the Money Federal Reserve Action Supply (up or down?) Lower the discount rate Conduct open market purchase Lower required reserve ratio Raise the discount rate Conduct open market sale Raise the required reserve ratio Question Set Four: 1. If reserves increase by $2 million and the required reserve ratio is 5%, what is the change in the money supply? 2. Suppose bank A borrows reserves from bank B. Now that bank A has more reserves than previously, will the money supply increase? Explain your answer. Question Set Five: 1. If reserves decrease by $4 million and the required reserve ratio is 6%, what is the change in the money supply? 2. According to Simple Quantity Theory of Money, what is the change in price level if money supply increases by 20% from $500 and both velocity and quantity are constant, at 2 and 100 respectively