'lhe following graph represents the money market in a hypothetical eoonomy. As in the United States, this economy has a central bank called the Fed, but unlike in the United States, the economy is closed {that is: the economy does not interact with other economies in the world). The money market is currently in equilibrium at an interest rate of 2.5% and a quantity of money equal to $0.4 trillion, as indicated by the greyr star. ('3) 4.5 H51 4.0 New MS Curve Money Demand 3.5 --I- 3-\" New Equilibrium 2.5 2.0 INTEREST RATE (P ercent) 1.5 1.0 0.5 D 0.1 0.2 0.3 0.4 0.5 0.3 0.? 0.3 MONEY {Tn'llions of dollars) Suppose the Fed announces that it is lowering its target interest rate by F5 basis points, or 0.?5 percentage point. To do this; the Fed will use open- market operations to V the V money by V the public. Use the green iine ( triangle symbol) on the previous graph to illustrate the e'ects of this polio-J,r by piecing the new moneyr supply curve (MS) in the conec't location. Piece the black paint (pins symboi) at the newr equiiibiium interest rate and quantity of money. Suppose the following graph shows the aggregate demand curve for this economy. The Fed's polic'iir of targeting a lower interest rate will v the cost of bonnwing. causing residential and business investment spending to V and the quantity of output demanded to V at each price level. Shift the curve on the graph to Show the generalr impact of the Fed's new interest rate target on aggregate demand. ('3 + Aggregate Demand PRICE LE'u'EL aggregate Demand OUTPUT