In the market for debt securities that promise to pay $1,500 in one year, the quantity demanded
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Question:
In the market for debt securities that promise to pay $1,500 in one year, the quantity demanded is
Bd =250 - 0.15b - 20Wt - 10W+1
where b is the price of a security, Wtis a variable equal to 1 if the economy is in an expansion today and 0 if the economy is in a recession today, and Wt+1is a variable equal to 1 if the economy is expected to be in an expansion next year and 0 if the economy is expected to be in a recession next year. The quantity supplied of the security is
Bs = 50+ 0.05b + 40Wt + 20Wt+1
Calculate the equilibrium price and quantity of the security.
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