Suppose that the required reserve ratio is 6%, currency in circulation is $520 billion, the amount of checkable deposits is $650 billion, and excess reserves are $25 billion

a) Calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier.

b) Suppose the central bank conducts an unusually large open market purchase of bonds held by banks of $420 billion due to a sharp contraction in the economy. Assuming the ratios you calculated in part (a) remain the same, predict the effect on the money supply.

c) Discuss two channels by which monetary policy affects stock prices and aggregate spending.