The following graph represents the money market in a hypothetical economy. This economy has a central bank, but unlike in Canada, 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 3.5% and a quantity of money equal to $0.4 trillion, as indicated by the grey star. 5.5 A 5.0 New MS Curve Money Demand 4.5 4.0 New Equilibrium INTEREST RATE (Percent, 3.0 2.5 2.0 Money Supply 1.5 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 MONEY (Trillions of dollars) Suppose the central bank announces that it is raising its target interest rate by 25 basis points, or 0.25 percentage point. To do this, the central bank will use open-market operations to decrease _ the supply of money by buying bonds from the public. Use the green line (triangle symbol) on the previous graph to illustrate the effects of this policy by placing the new money-supply curve (MS) in the correct location. Place the black point (plus symbol) at the new equilibrium interest rate and quantity of money. Suppose the following graph shows the aggregate-demand curve for this economy. The central bank's policy of targeting a higher interest rate will increase * the cost of borrowing, causing residential and business investment spending to increase * and the quantity of output demanded to decrease * at each price level