3. Assume that the following data characterize a hypothetical economy: money supply = $90 billion; quantity of money demanded for transactions = $50 billion; quantity of money demanded as an asset = $10 billion at 12 percent interest, increasing by $10 billion for each 2-percentage-point fall in the interest rate. a) Fill in the table with interest rates and Demand & Supply for money Interest rate Demand for Money Supply of Money 12% 10% 8% 6% 4% 2% b) What is the equilibrium interest rate? More information about the economy: Consumption is $220, Government spending is $60 and net expor are $20. Investments depend on interest rates: at an interest rate of 12%, investments will be $20 billion, increasing by $5 billion for each 2-percentage-point fall in the interest rate. To calculate the Real GDP, use the expenditures approach, so: GDP = C+I+G+Xn. For the impact of the investments on the real GDP, you should use an expenditure multiplier of 3. c) Continue the table: Interest Investment Impact on GDP (incl. Real GDP rate multiplier effect) 12% 10% 3% 5% 4% 2% Potential GDP is $390 billion. d) Is there either a recessionary output gap (negative GDP gap) or an inflationary output gap (positive GDP gap) at the equilibrium interest rate, and, if either, what is the amount? e) Given money demand, by how much would the central bank need to change the money supply to close the output gap? Explain the mechanism, step-by-step. Repeat questions d) and e) for a potential GDP of $420 billion. f) Is there either a recessionary output gap (negative GDP gap) or an inflationary output gap (positive GDP gap) at the equilibrium interest rate, and, if either, what is the amount? g) Given money demand, by how much would the central bank need to change the money supply to close the output gap? Explain the mechanism, step-by-step. 4. Which of the following Fed actions will increase bank lending? Select one or more answers from the