Explain and demonstrate diagrammatically what happens to the interest rate, consumption, investment and aggregate demand, if the Federal Bank sells government bonds to the public using the supply of money diagram (s).

Interest Rate in the Money Market 0.040 0.035 0.030 0.025 Initial Interest Rate Interest Rate After Bond Sale Interest Rate (r) 0.020 Initial Equilibrium New Equilibrium 0.015 0.010 0.005 0.000 0 100 200 300 400 500 Output (Y)Effect of Government Bond Sale on Consumption Consumption (Initial) Consumption (After Bond Sale) 200 150 Consumption (C) 100 50 0 200 250 300 350 400 450 500 Output (Y)Effect of Government Bond Sale on Investment Investment (Initial) Investment (After Bond Sale) 199 198 Investment (1) 197 196 195 0.02 0.04 0.06 0.08 0.10 Interest Rate (r)Aggregate Demand {AD} 400 8 c: 250 200 Effect of Government Bond Sale on Aggregate Demand AD {Initial} AD {After Bond Sale) 200 250 300 350 400 450 Output ('1') 500