ECON 308Problem Set 3 – Spring 201744 Total Points :In answering the following questions, round all

ECON 308Problem Set 3 – Spring 201744 Total Points :In answering the following questions, round all dollar amounts tothe nearest dollar. Round the multipliers and parameter values to3 decimal places. (Note: Answers will rarely work out to be evennumbers.)1. Assume initially that:Currency = $2,200DD = $4,000e = .333required reserves = $240TD = $12,000MMMF = $1,400Determine the initial levels of: kdd, kM1, kM2, MB, M1, M2, and ER.(1 ea.) 2. Now the Fed conducts a $350 open market sale to increase theinterest rate and reduce the money supply. Determine the finalvalues for: MB, M1, M2, Currency, DD, ER, RR, TD, kM1, and kM2after the OM Purchase runs fully through the deposit creationprocess. (2 ea.) 3. Go back to the original data given in question 1. Determine theeffect on MB, M1, M2, Currency, DD, ER, RR, TD, kM1, and kM2 ifthe currency to DD ratio “c†becomes .25. (For this question,assume that the Fed takes no action to change the monetarybase.)(1 ea.) 4. Considering your answer to (3.), what OMO action would benecessary to keep M1 at its original level if c changes to .25?(7)