The money multiplier is described in Section 4-4. Assume the following:i. The public holds no currency.ii. The ratio of reserves to deposits is 0.1.iii. The demand for money is given byM =SY(8 – 4i)Initially, the monetary base is $100 billion, and nominal income is $5 trillion (i.c.$5000 billion).a. What is the demand for central bank money? (Write down an expression for thedemand for central bank money)b. Find the equilibrium interest rate by setting the demand for central bank moneyequal to the supply of central bank money.c. What is the overall supply of money? Is it equal to the overall demand for moneyat the interest rate you found in part (b)?d. What is the impact on the interest rate if central bank money is increased to $300billion?e. If the overall money supply increases to $3,000 billion, what will be the impact oni? [Hint: Use what you discovered in part (c).]

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The money multiplier is described in Section 4-4. Assume the following: i. The public holds no currency. ii. The ratio of reserves to deposits is 0.1. iii. The demand for money is given by M =SY(8- 41) Initially, the monetary base is $100 billion, and nominal income is $5 trillion (ie. S5000 billion). a. What is the demand for central bank money? (Write down an expression for the demand for central bank money)