The demand curve and supply curve for one-year discount bonds with a face value of $900 are represented by the following equations

Bd: Q-2100 - 2P

Bs: P-Q+500

Where P stands for the price of bonds and Q stands for the quantity of bonds (expressed in thousands).

1. Calculate the equilibrium interest rate for the bond. 2p

2. At what interest rate will there be excess demand for bonds by 100 thousand? 2p 3. Ceteris paribus, the bond's supply changes by 70 thousand but the bond's demand changes by 50 thousand due to a rise in

expected inflation. What is the equilibrium interest rate after the rise in expected inflation? 3p

4. Money demand and money supply functions are stated,

Mp:/-0.3-(0.025275)M

Ms: M-4

Where, I is interest rate and M is quantity of money.

If money supply falls by 1 unit, by how much bond demand should change (assuming the bond supply remaining the same

liquidity preference framework is considered to be holding?

5p