Suppose that the demand for money function was Mo = 4 Y 1 000 i where MD is the quantity of money demanded, lie the rate of interest (an interest of 5 means 5 percent in this problem), and Y is real national income which currently is 1 500. The supply of money is 1 000, the target reserve ratio is 10 percent, there is no cash drain in the banking system, and the recessionary gap is 250. The price level does not change in this problem. a) What is the equilibrium value for the interest rate? What is the level of cash reserve of the banking system? b) Suppose that the Bank of Canada estimates that a reduction of the rate of interest to 4 percent would move the economy to full employment. Given this estimate, what would be the quantity of money demanded at full employment? c) Suppose the Bank of Canada reduces the target for the overnight rate prompting commercial banks to reduce the market rate of interest to 4 percent. Are the commercial banks experiencing now a situation of excess cash reserves or of too little cash reserves? What is the size of this excesslinsufcient cash reserves when Y: 1 500? d) What will the commercial banks do to eliminate this excesslinsufcient cash reserves? By how much should the level of cash reserves of the banking system change for the economy to move to full employment