2. Equilibrium in the money market The following diagram represents the money market in the United States, which is currently in equilibrium, as indicated by the grey star. INTEREST RATE (Percent) 6.0 00 Do graph and plot the points Money Supply 5.5 Money Demand 5.0 4.5 4.0 3.5 3.0 2.5 20 2.0 0.6 0.7 0.8 0.9 1.0 1.1 1.2 QUANTITY OF MONEY (Trillions of dollars) 1.3 New Curve New Equilibrium This is how New Curve looks when it's on the graph (,) These needs to be filled out so I know what the coordinates are for New Curve This is how New Equilibrium look like when it's on the graph ( (,) + These needs to be filled out so I know what the coordinates are for New Equilibrium is Suppose the Federal Reserve (the Fed) announces that it is lowering its target interest rate by 25 basis points, or 0.25%. It would achieve this by money supply or decreasing or the money demand increasing . Use the green line (triangle symbols) on the preceding graph to illustrate the effects of this policy. Place the black point (plus symbol) on the graph to indicate the new equilibrium interest rate and quantity of money. The sequence of events that results in a new equilibrium interest rate, after the Fed makes the change you selected, may be described as follows: Because there is ▾ money in the financial system, the quantity of interest-bearing financial assets such as bonds demanded sell bonds. This process continues until the new equilibrium which means that bond issuers Can issue bonds at lower interest rates and still OR must raise the interest they pay to interest rate is achieved. Jess or more. decreases or increases.