Tools of monetary policy Suppose that the household nominal income in an economy is \(£ 5,000\) billion and the demand for money is given by

\[
M^{d}=£ Y(0.08-0.4 i)
\]

a. If the money demand is equal to \(£ 100\) billion what is the interest rate?

b. What should the central bank do to interest rates if it wants to increase the money supply to \(£ 300\) billion?

c. If the central bank decides to expand money supply to \(£ 300\) billion, should it change the interest rate or implement open market operations?