2. Mr. Midas has wealth of $100000 that he invests entirely in money (a chequing account) and govern- ment bonds. Mr. Midas instructs his broker to invest $50000 in bonds, plus $5000 more in bonds for every percentage point that the interest rate on bonds exceeds the interest rate on his chequing account.

a. Write an algebraic formula that gives Mr. Midas's demand for money as a function of bond and che- quing account interest rates.

b. Write an algebraic formula that gives Mr. Midas's demand for bonds. What is the sum of his demand for money and his demand for bonds?

c. Suppose that all holders of wealth in the economy are identical to Mr. Midas. Fixed asset supplies per person are $80000 of bonds and $20000 of chequ- ing accounts. Chequing accounts pay no interest. What is the interest rate on bonds in asset market equilibrium?