The following diagram shows the channel system of Cash Rate use by the Central Bank. 

Suppose the cash rate is at the policy target rate. 

In the below diagram, policy target rate equals i^T, IOR stands for Interest on Reserves, ES funds stands for exchange settlement funds.

Suppose that there is an increase

in money supply and the actual value of the cash rate is different from the Central

Bank target rate. Following this change, the Central Bank undertakes open

market operations (OMO) to return the actual rate to the target rate.

Given that the actions of the Central Bank are successful, which diagram can illustrate the impact of OMO of the Central Bank?

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