The current Fed target for the interest rate is a band between 0 and 25 basis points (.25%). Suppose on a given day, the rate looks like it might go above the upper limit of the band. Describe what OMO the Fed would conduct in order to lower the rate so that it stays within the band?

Suppose the size of the OMO you described in part (a) was $100 Million, the reserve requirement is 10%, banks are holding 3% in excess reserves, and there is no change in cash held by the public in response to the Fed action. By how much will the money supply change as a result of this OMO? Show your calculations.