Suppose the money multiplier is 5. Suppose further that if the Central Bank changes the discount rate by 1 percentage point, commercial banks change their reserves by 200. To increase the money supply should the Central Bank increase or decrease the discount rate? Why? a. b. Determine the reduction or increase of the discount rate if the Central Bank wants to increase the money supply by 1,200 (Show all your calculations and fully explain). What is the change in the Central Bank Balance sheet immediately after the open market operation of point b? Explain. C.

Suppose the money multiplier is 5 . Suppose further that if the Central Bank changes the discount rate by 1 percentage point, commercial banks change their reserves by 200 . a. To increase the money supply should the Central Bank increase or decrease the discount rate? Why? b. Determine the reduction or increase of the discount rate if the Central Bank wants to increase the money supply by 1,200 (Show all your calculations and fully explain). c. What is the change in the Central Bank Balance sheet immediately after the open market operation of point b? Explain