Suppose that money demand is given by
Upper M Superscript d Baseline equals $Y left parenthesis 0.21 minus 0.6 i right parenthesis
where $Y is $130.
Part 2
If the Federal Reserve sets an interest rate target of 8%, the money supply it must create is $21.06. (Round your response to two decimal places.)
Part 3
If the Federal Reserve wants to decrease the interest rate i from 8 to 5%, the new level of the money supply it must set is $enter your response here. (Round your response to two decimal places.)
Part 4
As a result of the decrease in the interest rate from 8 to 5%, the Federal Reserve's balance sheet
â–¼
expands
contracts
in terms of the assets and liabilities it holds