For each prompt below, carefully and thoroughly follow the directions. For the graphs, be certain to accurately label all axes, curves, and equilibria points. Use arrows to indicate the direction of any shifts.

A boost in business confidence causes a significant increase in business investment.

(a) Draw a fully labeled money market, showing the impact of the investment change on the equilibrium nominal interest rate.

(b) Based on the change in part (a), whatwill happen to the price of previously issued bonds? Explain.

(c) On a new graph, illustrate the change in the money supply that would be required to restore the original equilibrium interest rate.

(d) What could shift the money supply in the way indicated in part (c)?

(e) Assume that the original equilibrium nominal interest rate is restored. If the real interest rate turns out to be lower, does that mean the price level has increased or decreased? Explain.