Question
Below, you will be asked questions about scenarios that will lead to changes in the supply or demand for bonds. For each of the following
Below, you will be asked questions about scenarios that will lead to changes in the supply or demand for bonds. For each of the following scenarios, be able to: draw the shift in the supply/demand curve accordingly, state what happens to the bond price, and state what happens to the interest rate.
An increase in the government's desired expenditure relative to its revenue
A decrease in expected inflation
An increase in wealth of potential investors
An increase in the expected future interest rates
A fall in the riskiness of the bond (relative to the riskiness of alternatives)
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