We are going back to the fall of 1998, back in the 'midst' of the new economy. The U.S. economy weathered the E. Asian quite well and the U.S. economy, by almost all accounts, was performing brilliantly. In August of 1998, Russia defaulted on all the debt held by foreign investors. This "shock" rattled financial markets so much that the Fed went into action andlowered short term interest rates 3 times in a seven week period. In what follows, we are going to model this 7 weeks period using our new acquired reserve demand / reserve supply diagram.

Here are the relevant dates and interest rates:

Point A:August 1998: i_ff= 5.5%

Point B:September 1998: Lowered interest rates to i_ff=5.25%

Point C:October 1998: Lowered interest rates to i_ff= 5.00%

Point D:November 1998: Lowered interest rates to i_ff= 4.75%

Note importantly, we are modeling the behavior of the federal funds rate during this period. The forecasted reserve demand at this time is given below. For simplicity, this reserve demand function is stable (constant) throughout this exercise:

R_d= 950 - 110 i_ff

What is the value of the Reserve Supply in August 1998?Hint: use the R_dequation and the value of iff to get the value for R_d. Then remember that R_d=R_sin equilibrium!

Group of answer choices

400

427.5

350

345

Question 14

3pts

On the graph provided in the graphing template,HAND DRAWthe Reserve Demand and label it R_d. Then add the reserve supply associated with #13 above and label it R_S^A. Then label the intersection of the R_dand R_sas point A. Label the value for i_ffand the value of the reserve supply on the horizontal axis.

This work is to be done on yourHomework 05 Graphing template. You will upload this work, along with other work to be done on the template, to question #22 at the end of this HW.Enter the word "Finished" into the text-box below when ready to move on.

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Question 15

3pts

What is the value of the Reserve Supply in September 1998?

Group of answer choices

375

372.5

400

345

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Question 16

3pts

On your graph in the graphing template,HAND DRAWthe reserve supply associated with #15 above and label it R_S^B. Then label the intersection of the R_dand R_sas point B. Label the value for i_ffand the value of the reserve supply on the horizontal axis.

This work is to be done on yourHomework 05 Graphing template. You will upload this work, along with other work to be done on the template, to question #22 at the end of this HW.Enter the word "Finished" into the text-box below when ready to move on.

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Question 17

3pts

Is this change in the R_sdue to open market purchases or sales?

Group of answer choices

sales

purchases

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Question 18

3pts

What is the value of the Reserve Supply in October 1998?

Group of answer choices

345

427.5

372.5

400

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Question 19

3pts

On your graph in the graphing template,HAND DRAWthe reserve supply associated with #18 above and label it R_S^C. Then label the intersection of the R_dand R_sas point C. Label the value for i_ffand the value of the reserve supply on the horizontal axis.

This work is to be done on yourHomework 05 Graphing template. You will upload this work, along with other work to be done on the template, to question #22 at the end of this HW.Enter the word "Finished" into the text-box below when ready to move on.

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Question 20

3pts

What is the value of the Reserve Supply in November 1998?

Group of answer choices

425

345

400

427.5

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Question 21

3pts

On your graph in the graphing template,HAND DRAWthe reserve supply associated with #20 above and label it R_S^D. Then label the intersection of the R_dand R_sas point D. Label the value for i_ffand the value of the reserve supply on the horizontal axis.

This work is to be done on yourHomework 05 Graphing template. You will upload this work, along with other work to be done on the template, to question #22 at the end of this HW.Enter the word "Finished" into the text-box below when ready to move on.