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to Canvas! Due by Friday, April 12, at 11:55pm. Problem A: "Scarce Reserves" (5 points) Draw the money demand curve during the pre-2008 times of "scarce reserves". Draw three different money supply curves on this graph, showing how increasing or decreasing the money supply DOES affect interest rates in this framework. Hint: Think about what the slope of the MD curve would look like here. MS, MS 2 M5 3 On both graphs, label both axes, all functions, all relevants points or intersections. Pay careful attention to the slopes of your 3% - - Ez fucntions. Big Hint: See pages 182-185 in your course - - packet. 2% - - - - MD SISOO $1800 $2100 aM(billions) Problem B: "Ample Reserves" (5 points) Draw the money demand graph after 2014, including today, in which we currently live in a time of "ample reserves" due to multiple rounds of quantitative easing (QE). Draw three different money supply curves on this graph, showing how increasing or decreasing the money supply DOES NOT affect interest rates in this framework. Hint: Think about what the slope of the MD curve would look like here. during times of "scarce reserves " O . M. O IS effective MS, MS 2 2 MS10 to change ? quantitative easing QE 4% MS5 MSy 3% 0.1%. . MD 6 6 QM Trillion Trillion Trillion Trillion Trillion same 2 liquidity trap - old tools of O. M.O are no longer effective