Directions: Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional...

Extracted text: Directions: Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. Commercial banks in Pantherland hold no excess reserves. The required reserve ratio is 0.2. The central bank of Pantherland has become concerned about a steep decline in consumer spending. (a) Calculate the simple money multiplier. Show your work. (b) Identify an open market operation that Pantherland's central bank is likely to implement to address the decline in consumer spending. (C) Draw a correctly labeled graph of the money market and show the effect of the central bank's policy identified in part (b) on the nominal interest rate. (d) Explain the effect of the change in part (c) on aggregate demand in the short run.