a) Canadian stock market has been in a boom since last March. What would happen to demand for bonds? Why? (Hint: think of the asset demand theory.) Other things equal, what would happen to bond price and interest rate? Draw a graph to illustrate your answer.

b) Canadian government has run huge budget deficit to pay benefits to the people, as a measure to relieve income losses due to the pandemic. What would happen to supply of bonds? Why? Other things equal, what would happen to Bond price and interest rate? Draw a graph to illustrate your answer.