Graphical explanation for expansionary monetary policy using AS/AD model as well as effect of bond price on federal bond's price.
1. Elucidate the effect of expansionary monetary policy in the short-run using the AS/AD model. Make sure to describe why the curves shift.
2. Using supply and demand curves, demonstrate the effect of an open market sale of bonds by the Fed on the price of a bond. What happens to the interest rate associated with that bond?