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$10,000 $9,800 $9,600 $9,400 $9,200 $9,000 $8,800 $8,600 $8,400 $8,200 $8,000 $7,800 $7,600 $7,400 $7,200 $7,000 $0 $50 $100 $150 $200 $250 $300 $350 $400

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$10,000 $9,800 $9,600 $9,400 $9,200 $9,000 $8,800 $8,600 $8,400 $8,200 $8,000 $7,800 $7,600 $7,400 $7,200 $7,000 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 Bond Price Smillion The graph above shows the market for a one-year discount bond with a face value of $10,000. Suppose that the economy comes out a recession and both lenders and borrowers become optimistic about future economic conditions. As a result demand increases (to lend money) by $150 million and supply increases (to borrow money) by $300 million. The new equilibrium interest rate equals percent

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