a) Explain why people have a demand for money.

b) Using the model of the money market for the case of interest rate control, shift the appropriate curve(s) to show the impact of a decrease in the interest rate caused by an expansionary change in monetary policy. Explain the changes in money demand and money supply in the return to the new equilibrium. Label each axis and curve that you draw.

c) Compare and contrast the two types of monetary policy in terms of their ultimate objectives and the instruments used to achieve these objectives.