the policy rate lie in the centre of the channel. Its current target value for the policy rate is 2%. (a) What overnight interest rate will the central bank of Wekanda pay on reserves? (1.75%) (b) At what interest rate will the central bank of Wakanda be willing to lend to banks who wish to borrow reserves overnight. (2.25%) On a particular day the central bank of Wekanda estimates the demand for reserves (R") by the banking system to be given by; Ra = 10 - 2.5 x ip where i" is the level of the policy rate in percent. (c) What supply of reserves (in billions of Wikandan dollars) would be required during the day to ensure the actual value of the policy rate was equal to the central bank's target value of 2%? (5 billion) (d) Due to the payment of tax refunds to households the central bank estimates the supply of reserves during the day will be 6 billion dollars. If the central bank takes no action, what will be the effect on the policy interest rate? (It will fall to the bottom of the channel and equal 1.75%). (e) What form and magnitude of open market operations will be required by the central bank if it is to achieve its policy rate target of 2%? (Bond sales equal to 1 billion dollars)