After you have studied Economics in the News on pp. 176–177, answer the following questions.

a. Why do bond prices and interest rates move in opposite directions?

b. Looking at Fig. 1 on p. 177, what must have happened to either the demand for or the supply of loanable funds during 2011, 2012, 2013, 2014, and 2015?

c. If the assumption in Fig. 2 on p. 177, that the demand for bonds did not change, is wrong and the demand for bonds increased during 2016, how does that change the story about how the supply of bonds changed?

d. If an economic expansion gets going in 2018, what will happen to the demand for loanable funds and the real interest rate?

Fig. 1

Fig. 2

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Capital (thousands of dollars) 40 30 20 10 Initial capital Jan. 1, 2018 Time Depreciation Initial capital less depreciation Gross investment Initial capital less depreciation During 2018 Net investment during 2018 Initial capital Dec. 31, 2018