The following are the money demand and money supply functions in an economy.

\[
\begin{gathered}
M^{s}=€ 8,000 \\
M^{d}=€ 40,000(0.25-i)
\end{gathered}
\]

a. Calculate the equilibrium interest rate.

b. Suppose the central bank raises the equilibrium interest rate to \(10 \%\), will there be excess money supply or money demand? What monetary policy should be followed to reach the new equilibrium interest rate?