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(a) The liquidity trap does not concern itself with the negative slope of the demand curve for money, rather it is concerned with that
(a) "The liquidity trap does not concern itself with the negative slope of the demand curve for money, rather it is concerned with that part of the curve where it becomes perfectly interest elastic or flat." How far do you agree with this statement? Discuss. (b) Consider a bond that promises to pay Rs 1000 in one year. i. What is the interest rate on the bond if its price today is Rs 750? Rs 900? ii. What is the relation between the price of the bond and the interest rate? iii. If the interest rate is 8%, what is the price of the bond today? iv. How are bond price and interest rates related?
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Advanced Accounting
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
12th edition
77862228, 978-1259283567, 1259283569, 978-0077862220
