1. Suppose the Central Bank decides to increase money supply by $2 million.
(a) How can it attain this target through open market operations if we
assume people hold no cash, the reserve requirement is 20% and there are no excess reserves?
(b) How can it attain this target through changing reserve requirement
if we assume people hold no cash, the monetary base is $10 million,
the current reserve requirement is 20%, and there are no excess reserves? a. We have:
MS= Monetary base x = Monetary base x = 2 million  Monetary base= 0.4 million
 The Central Bank can attain this target through open market operations if
people hold no cash by issuing bonds with the total value at 0.4 million b. We have:
MS= Monetary base x = 10 x = 50 million
Because the Central Bank wants to increase money supply by $2 millio
 MS = 52 = Monetary base x = 10 x  =  Reserve ratio =
 Reserve requirement = 19.23%