You are an economist for the nation of Blueland, which is currently an unemployment rate of 5% and an inflation rate of 2%. The natural rate of unemployment in Blueland is 4%.

a) What will happen to the nominal interest rate and the price of bonds if the federal reserve decides to lower the reserve requirement using a limited reserves model for Blueland? 2 pts.

b) Based on your answer to part c, what will happen to Blueland's exports ? 2 pts. Explain. 4 pts.