Assume we have the following money demand function and we assume P=1 always. Md=Y(0.4i) Where Md is the demand for money, Y is real gdp and i is the nominal interest rate in decimal form. GDP=1100 and Money supply is fixed at M=220. In addition suppose there is a one-year-bond that promises to make a payment of $12 one year from now and the interest on the bond is the nominal interest rate i (a) (3 pts) What is the money demand when i=4% ?, When i=20%. For which interest rate is money deman lower? Explain why? (b) (3 pts) What is the price of the bond when i=4% ? When i=20% ? (Hint you're only going to be willing to pay the Present value of the bond. It pays $12 in one year so would want to discount that amount) (c) (2 pts) Draw a graph for money supply and money demand and calculate the equilibrium i. (d) (5 pts) Suppose the central bank increases the money supply by 110 (so it is now 330). Graph and calculate the new equilibrium i (e) (5 pts) Keep M=330. To what amount would nominal GDP have to change to have a money market equilibrium level consistent with an interest rate i equal to 20%. Assume we have the following money demand function and we assume P=1 always. Md=Y(0.4i) Where Md is the demand for money, Y is real gdp and i is the nominal interest rate in decimal form. GDP=1100 and Money supply is fixed at M=220. In addition suppose there is a one-year-bond that promises to make a payment of $12 one year from now and the interest on the bond is the nominal interest rate i (a) (3 pts) What is the money demand when i=4% ?, When i=20%. For which interest rate is money deman lower? Explain why? (b) (3 pts) What is the price of the bond when i=4% ? When i=20% ? (Hint you're only going to be willing to pay the Present value of the bond. It pays $12 in one year so would want to discount that amount) (c) (2 pts) Draw a graph for money supply and money demand and calculate the equilibrium i. (d) (5 pts) Suppose the central bank increases the money supply by 110 (so it is now 330). Graph and calculate the new equilibrium i (e) (5 pts) Keep M=330. To what amount would nominal GDP have to change to have a money market equilibrium level consistent with an interest rate i equal to 20%