iii) Assume Economy X is facing an increase in aggregate spending at current GDP that is above its potential GDP. What would be the likely problem facing economy X in table 1. Explain, using appropriate terminologies the process on how (transmission mechanism) the Reserve Bank can solve the problem of economy X.

Nominal Interest Quantity of Money Money Supply Rate (% per year) Holdings ($M) ($M) A 9 1.8 3.0 B 7 3.0 3.0 C 5.4 3.0 (i) What is the relationship between the nominal interest rate and the quantity of money holdings (as shown in table 1) and why does this relationship exist? (3 marks) (ii) Describe the relationship between the nominal interest rate and the money supply (as shown in table 1)