1. What happens to the monetary base and the money supply if:
(a) the central bank lowers the discount rate;
(b) the central bank lowers the discount rate and also sells bonds to the public;
(c) the central bank forbids overnight loans and eliminates the overnight loan market.
2. Show what happens to the money supply if:
(a) the economy enters a boom and interest rates rise;
(b) the underground economy with illegal holdings of currency is eliminated;
(c) give a signi?cant discount for payment in cash rather than credit cards;
(d) credit cards are replaced totally by debit cards;
(e) both credit and debit cards are replaced by smart cards.