I SeOLOMIEB IO I8 > 40 POINTS 1) Given the following information C=10+0.9Yd I*=25+0.8/i G=25 t=0.10 Ms =120 Md = 0.3NP + 24 reserve requirement ratio: 0.20 a) State the equilibrium conditions for BOTH the money market and commodity market. b) Solve for the equilibrium rate of interest and NP. ) What is the level of desired investment? d) Assuming that the Money supply increases by 100 to 220 solve for the new equilibrium rate of interest, NP and desired level of investment. 10 POINTS 2) Show your answer to the above question graphically. Pay particular attention to the initial equilibriums and the changes brought about by the change in the Money Supply. 15 POINTS 3) Keynesian theorists doubt the efficacy of monetary policy during a recessionary period. In 50 words or less explain why they feel this is the case. 15 POINTS 4) The Monetarists reach different conclusions regarding the effectiveness of monetary policy in manipulating the equilibrium level of nominal national product. Their analysis is based upon the equation of exchange. State the equation of exchange and the critical underlying assumption they make that drives their vision of monetary policy. QM