Question $1$

a$)$ Given the following data about the monetary sector of the economy:

$M_d=0\mathrm{.}4Y-80i$

$Ms=$$$1200$

where $M_d$ is demand for money, $Y$ is level of income, $M_s$ is rate of interest and $M$

is the supply of money

i$.$ Derive the equation for $LM$ function$|$

ii$.$ Give the economic interpretation of the LM curve. Draw LM curve from

the above data