-The Above Table Has the Demand for Money Schedule

question 451

Essay

$\begin{array}{|c|c|}\hline \begin{array}{c}\text { Interest rate } \\\text { (percent per year) }\end{array} & \begin{array}{c}\text { Uantity of money } \\\text { demanded (trillions } \\\text { of } 2005 \text { dollars) }\end{array} \\\hline 8 & 0.7 \\\hline 6 & 0.9 \\\hline 4 & 1.1 \\\hline 2 & 1.3 \\\hline\end{array}$
-The above table has the demand for money schedule.
a) If the Fed supplies $1.1 trillion dollars, what is the equilibrium interest rate?
b) Discuss how equilibrium is restored if the interest rate is greater than the equilibrium rate found in part a).

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