$10,000 $9,800 $9,600 D S $9,400 $9,200 $9,000 $8,800 $8,600 Bond Price $8,400 $8,200 $8,000 $7,800 $7,600 $7,400 $7,200 $7,000 So $50 $100 $150 $200 $250 $300 $350 $400 $450 $million The graph above shows the market for a one-year discount bond with a face value of $10,000. Volatility of inflation rate increases and as a result demand for this bond decreases by $200 million dollars and the supply decreases by $50 million dollars. This causes the equilibrium interest rate to change to percent