Question: a. Decompose the liquidity preference demand for money function: M d = D t (PY) + D a (R). That is, what are the different

a. Decompose the liquidity preference demand for money function: Md = Dt(PY) + Da(R).

That is, what are the different reasons we wish to hold money and what are these reasons/demands determined by (or a "function of")?

And, in our model of the economy, "where" & how is the equilibrium interest rate determined?

b. Briefly explain withor withouta bit of maths, why bond prices & interest rates are inversely related.

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