Consider the figure to the right. Suppose that the Bank of Canada wants to implement a monetary policy V aimed at pushing down the rate of interest prevailing in the economy. Use the appropriate panel of the figure to assist in explaining whether the Bank of Canada should buy or sell existing bonds. O 1.) Using the line drawing tool, draw either a new demand curve (D, ) or a new supply curve ($2) that shows how the Bank of Canada's buying or selling of existing bonds could push down the prevailing rate of interest. Properly label your line 2.) Using the point drawing tool, indicate the new equilibrium price and quantity. Label this point "E, " Price of Bonds Carefully follow the instructions above, and draw only the required objects. Since the market price of existing bonds and the rate of interest are directly related, an open market purchase of bonds by the Bank of Canada raises the price of bonds and reduces the interest rate prevailing in the economy. Quantity of Bonds in the Private Marketplace