Question 3 (worth 2 points). The Federal Reserves (Central Bank) recently announced that interest rate was reduced. Explain the process using the money market and bond market (use the hint below). Remember that the Fed increases or reduces the money supply by buying or selling bonds from/to the public (affecting supply of bonds). Using a demand and supply for bonds, show how interest rates are affected as a result. Is your answer consistent with what you would expect to find with the money market equilibrium (in other words, did the interest rate decline in both markets)? (Hint: Draw two separate graphs and shift the curves (Bond market and Money market), label all the axis, all the curves). 4