1. Use the table below to answer the questions:

Interest rate Asset demand

(in %) (billions)

14 $200

13 300

12 400

11 500

(a) If the transactions demand for money equals 10% of nominal GDP, the nominal GDP is $6000 billion, and the supply of money is $900 billion, what is the equilibrium interest rate?

(b) If nominal GDP remains constant, and the money supply is increased from $900 to $1000 billion, what will the equilibrium rate of interest be?

2. Using the balance sheet below and assuming a required reserve ratio of 20%, answer the following:(a) What is the amount of excess reserves?(b) This bank can safely expand its loans by what amount?(c) By expanding its loans by this amount in part (b), its checkable deposits would expand to what amount (if all loans were made to checking account customers)?(d) If checks clear against the bank equal to the amount loaned in (b), how much would remain in reserves and in checkable deposits?