During the euro-area sovereign debt crisis, the spread between the yields on bonds issued by the governments of peripheral European countries (such as Greece, Ireland, Italy, Portugal and Spain) and those on bonds issued by Germany widened considerably. Use the model of supply and demand for bonds to illustrate how this could be explained by a change in investors perceptions of the relative riskiness of peripheral sovereign versus German bonds.

Instructions: On the graph below, use the tool provide to show this change by grabbing, dragging, and then dropping the curve(s) to the new position(s).