(a) Discuss how the below event affects money market: (1) People think interest rate will rise 13 People think exchange rate will rise (iii) People think inflation will rise (iv) People think the economy is going to enter recession (v) People think the economy is going to grow faster (5 marks) (b) If the interest was targeted at a level that is below the current market equilibrium, (i) how it affects the aggregate demand, real income and balance of payment? Explain. (5 marks) (ii) what tools can the central bank use to reverse the change in the interest rate? (5 marks) (c) The following table provides data on types of money in country E where the currency code is E. E millions Currency in circulation 1,900 Short Term Repurchase Agreements 4,213 Small savings and Time Deposits 7,451 Large time deposit 7,652 Demand deposits 5,423 (5 marks) Using the table above, work out the figure for the following: (i) M1 (ii) M2 (iii) M3 (d) Draw the diagrams of a money market and an AD-SRAS, explain how expansionary monetary policy affects real GDP in an economy