(b) (i). Write down the detailed equation which relates the money supply and the monetary base. Explain all the terms. Suppose the interest rate on loans rises, what impact would this have on the money supply? Briefly explain your answer. (ii) Explain the derivation of the money demand equation using the Cambridge Approach. How does the money demand equation under the Liquidity Preference Theory differ from the Cambridge Approach? How does velocity compare in these two approaches? (iii) Suppose we believe in the Keynesian Approach to deriving money demand. In addition, suppose it is the case that the IS curve is significantly more volatile than the LM curve. If the central bank wants to minimize output volatility, should it target the money supply or interest rates? Briefly explain and illustrate your answer. (35 marks total)