Consider the information in question 1. demand for money increases by $1 trillion as corporations increase their loans from banks. (explanation for the curious: this can happen if the aggregate amount of new loans taken out by people is greater than the amount of previous loans paid back to the banks.) if the fed does not take any action to counter this event, the nominal interest rate will and the money supply will change trillion dollars. if the fed fears that this event could lead to higher inflation, it will reduce the supply of reserves by dollars in order to increase the fed funds rate percent and the nominal interest rate to percent. after the fed's contractility monetary policy the equilibrium quantity of money will trillion dollars.