The demand for money is given by Md = $Y (0.3-i), where $Y = 120 and the supply of money is $30.
a. What is the equilibrium interest rate?
b. Suppose the central bank wants to decrease interest rate by 2 percentage point (e.g. , from 8% to 6%). Given the above information for Md and Y, figure out the level of money supply that it will have to set in order to achieve its interest rate target.