The table below shows money demand and supply schedules for a hypothetical economy, Mercantia.

Nominal Interest Rate (%)	Quantity Demanded (Dm) ($ billions)	Quantity Supplied (Sm0) ($ billions)	Quantity Supplied (Sm1) ($ billions)
20	40	75
15	50	75
10	75	75
5	125	75
0	-	75

a, Fill the table, values for sm1 a. Draw a graph showing D_m and S_m0. Plot all four points for the money demand curve. For the money supply curve, plot only the two endpoints when the interest rate is 20% and 0%.

b. Identify the initial equilibrium interest rate and equilibrium quantity of money.

The initial equilibrium interest rate is % and equilibrium quantity of money is $ billion.

c. What happens in Mercantia's money market if the prevailing interest rate is initially 5 percent? 15 percent?

If the interest rate is initially 5% the quantity of money supplied (Click to select) exceeds falls short of quantity demanded. Wealth holders respond to this (Click to select) surplus shortage in the money market by (Click to select) buying selling bonds. This pushes (Click to select) up down bond prices and (Click to select) reduces raises the interest rate until equilibrium in the money market is reached. If the interest rate is initially 15%, the quantity of money supplied (Click to select) exceeds falls short of quantity demanded. Wealth holders respond to this (Click to select) surplus shortage in the money market by (Click to select) buying selling bonds. This pushes (Click to select) up down bond prices and (Click to select) reduces raises the interest rate until equilibrium in the money market is reached.

d. What happens to the money supply schedule if there is a $25 billion decrease in the money supply at every interest rate? Fill in the Quantity Supplied (S_m1) column in the table above and show the new money supply curve S_m1 on your graph. Plot only the two endpoints of the new curve, when the interest rate is 20 percent and 0 percent.

If the money supply decreases by $25 billion at each possible interest rate then the money supply (Click to select) exceeds falls short of money demand at the initial equilibrium interest rate. Wealth holders respond to this (Click to select) surplus shortage in the money market by (Click to select) buying selling bonds. This pushes (Click to select) up down bond prices and (Click to select) reduces raises the interest rate until a new equilibrium in the money market is reached.

e. What is the new nominal equilibrium interest rate in this market?