What shifts on the graph provided?1st Blank options are greater or less 2nd Blank options are increase or decrease 3rd Blank options are buy or sell 4th Blank options are have to offer higher or can offer lower 5th Blank what's the interest rate? The following graph shows the money market in a hypothetical economy. The central bank in this economy is called the Fed. Assume that the Fed fixesthe quantity of money supplied.Suppose the price level increases from 90 to 105.Shift the appropriate curve on the graph to show the impact of an increase in the overall price level on the market for money.12Money Supply10Money DemandOMoney Supply4Money Demand220406080100120MONEY (Billions of dollars)After the increase in the price level, the quantity of money demanded at the initial interest rate of 6% will bethan the quantity of moneysupplied by the Fed at this interest rate. People will try totheir money holdings. In order to do so, people willbonds and otherinterest-bearing assets, and bond issuers will find that theyinterest rates until the money market reaches its newequilibrium at an interest rate of%INTEREST RATE (Percent)

An increase in price level can be termed as inflation. A change in price level leads to a change in interest rates. Inflation will result in an increase in average interest rates in an economy. When there is an increase in price level, the quantity of money demanded will be more and people will try increase their money holdings to meet their expenses. When the demand for money increases, people will sell their bonds and other interest bearing assets to raise more liquid cash. Then the bond issuers have to offer higher interest rates to attract buyers. The new equilibrium interest rate will be 8%. Therefore After the increase in the price level, the quantity of money demanded at the initial interest rate of 6% will be greater than the quantity of money supplied by the Fed at this interest rate. People will try to increase their money holdings. In order to do so, people will sell bonds and other interest bearing assets, and bond issuers will find that they have to offer higher interest rates until money market reaches its new equilibrium at an interest rate of 8%.