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Question 1 [5 marks] Given Bd is P = 1100-5Q, Bs is P = 500+15Q, F (future value of discounted bond) is 1000, real money demand is L = 0.8Y-62.5i* and real balance is $1500m. a) Determine the equilibrium interest rate (i*) (2 marks). b ) Determine the real GDP (Y*) (2 marks) C) Show and explain the financial market dynamics in (Bs-Bd), (Ms-Md) and (IS-LM) spaces if Bd increased to 1300-5Q (1 mark) Question 2 [5 marks] If the IS curve was Y= 2240 -120r and MP function is r = 2 + 0.5TT (a) Derive the AD curve (2 marks) (b) Determine the value of RGDP if Phillips Curve was IT = 10 + 0.5(Y-Y*) + p, where potential RGDP is 1500 and p (financial friction) is 2% (2 marks) (c) Explain how he MP function is nested within the famous Taylor rule? (1 mark) Question 3: [5 marks] The following describes GDP and sectorial activity (in current $F) in Fiji. Fiji's Major Economic Activity 2016 2017 2018 Farming, forestry & fishing 334670509 363687573 383157777 Mining 436802716 422152147 467456919 Manufacturing 345633853 334363076 368642445 Building Construction 98670098 134881522 122682778 Wholesale & retail trade 455844313 508031 169 497438457 Transport and communication 363521415 441432666 441921758 Other Services 694152796 787826948 814241009 Gross Value Added 2729295699 2992375102 3095541143 Nominal rate of growth 9.6% 3.4% (a) Determine the share of agriculture on GDP for 2017 and 2018 (2 marks) (b) Determine the contribution of agriculture on growth rate of output in 2019 (2 marks) (c) Calculate real GDP growth rate in 2019, if expected inflation rates was 1.5% (1 mark) 3 Question 4 [5 marks] If C = 680, YD = 820, G = 150, 1 = 180, TR = 50, X = 250, IM = 100. Compute Y and T. With these values, balance the NAM below - copy NAM in your answer book (5 marks). Producer Hslds Govt Investors ROW Total Producer Hslds Govt. Investors ROW Total