The above table has the demand and supply schedules for money. What is the equilibrium nominal interest rate?

If the purchasing power of the dollar is less than the purchasing power of the British pound, purchasing power parity predicts that the exchange rate will

A) decrease if the exchange rate is less than 1 pound per dollar. B) be equal to the relative purchasing power across the currencies in the long run. C) increase if the exchange rate is greater than 1 pound per dollar. D) All of the above are correct.

If the central bank did not follow the Taylor principle, an increase in inflation would lead to ________

A) a decrease in the nominal interest rate B) an increase in inflation C) a decrease in aggregate expenditure D) all of the above E) none of the above