ECO531 (MONETARY THEORY AND POLICY) QUESTION 2 (Sketch graph and explain for a and b question) a) Using the Keynesian Model (Liquidity Preference Framework) as the foundation, use a suitable diagram to explain the movement in equilibrium interest rate if Bank Negara Malaysia increases the money supply by buying bonds in the open market. b) Applying the bond market analysis, explain how the market equilibrium rate of interest is affected by the following changes: i) Negative output growth in the economy. ii) The prices in the bond market become more volatile. iii) Other assets take much longer time to sell as compared to bonds