Use the graph and the supply and demand for bonds to show what will happen to interest rates if the economy's GDP expands. (Remember that bond prices are inversely related to interest rates.) Bond market 1. Using the line drawing tool, show the effect on the bond supply and/or bond demand curve. Properly label your curve or curves. 2. Using the point drawing tool, indicate the new equilibrium interest rate and quantity of bonds, and label it '2'. B$2 Carefully follow the instructions above, and only draw the required objects. Price of bonds when the Based on empirical evidence, because interest rates increase economy is expanding, interest rates are said to be procyclical Using the liquidity preference framework, when the economy expands: Bd2 O A. the demand for money will increase, shifting the money demand curve to the left Quantity of bonds O B. the demand for money will decrease, shifting the money demand curve to the left CH O C. the demand for money will decrease, shifting the money demand curve to the right OD. the demand for money will increase, shifting the money demand curve to the right