Congratulations! You have been appointed adviser to the Federal Reserve Bank. a. The Federal Open Market Committee decides that it must increase the money supply by $50. Committee members tell you the reserve ratio is 0.2. They ask you what directive they should give to the open market desk. You tell them, being as specific as possible, using the money multiplier. The Fed should $ worth of government bonds. b. They ask you for two other ways they could have achieved the same end. You tell them. Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box. Lower taxes unanswered Lower the reserve requirement unanswered Reduce the discount rate unanswered Raise taxes unanswered Increase the discount rate unanswered Raise the reserve requirement unanswered c. Based on the AS/AD model, tell them what you think the effect on the price level of your policy will be. Using the AS/AD model, the effect of increasing the money supply in the short run would be to real output and the price level. In the long run, the effect depends on where the economy is relative to potential. If it is above potential, the short-run aggregate supply curve will shift , bringing the economy back to potential. If the economy is below potential and through monetary policy brought to potential, the effect will be to output and the price level.