Advanced Analysis: Refer to the following table, in which Qd is the quantity of loonies demanded, Pis the dollar price of loonies. Qs Is the quantity of loonies supplied in year 1 and Qs'is the quantity of loonies supplied in year 2. All quantities are in billions. Assume the exchange rate is fixed against the dollar at 125 dollars *1 loonie. Os Od 40 60 80 100 P 135 130 125 120 os Be 60 60 40 20 40 20 Instructions: Enter your answer as a whole number a. In year 1. what would be the minimum Initial size of the US reserve of loonies such that it could maintain the peg throughout the year? billion loonies b. What about the minimum initial size that would be necessary at the start of year 22 billion loonies Next, consider only the data for year 1 What peg should the United States set it it wants the foxed exchange rate to increase the domestic money supply by $5 4 trillion? dollars per loonie
