Q.1 The money demand curve is given by Md = 100-500r ; where Md is money demand and r is the interest. The money supply

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Q.1 The money demand curve is given by Md = 100-500r ; where Md
is money demand and
r is the interest. The money supply (Ms) is at 60.
a. Calculate the market interest rate.
b. At an interest rate of 8 % , calculate the level of money demand
. Is there excess demand or
supply of money?
c. If Central Bank increases money supply to 80, what will be the
new equilibrium interest
rate? Explain adjustment.
d. Graphically demonstrate the effect on the equilibrium interest
rate of an increase in the
money supply by the Fed.