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Consider the basic model for interest rate determination: M1d=$Y1L(i)andM1s=M1 where M1 is exogenous. i) In class we determined that the money demand (Md) curve is downward sloping whereas the money supply (Ms) curve is vertical. What explains these shapes? ii) Currently, the money market is at the equilibrium with the interest rate at the Fed's target level. Suppose the aggregate nominal income in the economy decreases. Explain how it affects the equilibrium interest rate and the equilibrium money using the graph of the money market equilibrium. iv) Suppose c0 increases by $300M. How much does equilibrium Y change when c1=0.5 and t1=0.2. What about when c1=0.5 and t1=0 ? Consider the basic model for interest rate determination: M1d=$Y1L(i)andM1s=M1 where M1 is exogenous. i) In class we determined that the money demand (Md) curve is downward sloping whereas the money supply (Ms) curve is vertical. What explains these shapes? ii) Currently, the money market is at the equilibrium with the interest rate at the Fed's target level. Suppose the aggregate nominal income in the economy decreases. Explain how it affects the equilibrium interest rate and the equilibrium money using the graph of the money market equilibrium. iv) Suppose c0 increases by $300M. How much does equilibrium Y change when c1=0.5 and t1=0.2. What about when c1=0.5 and t1=0