If the Fed announces they will start a program to lower the inflation rate and the public believes them, then bond demand and/or supply will react as in graph:

Question 3 options:

(a) - Bond demand will increase, with no effect on the supply curve

(b) - Bond demand will decrease, with no effect on the supply curve

(c) - Bond demand will decrease while bond supply increases

(d) - Bond demand will increase while bond supply decreases

Question 4(1 point)

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You analyze the bond market. One day you observe that bond prices go down while bond market yield increases. The reason could be that:

Question 4 options:

Fees on stock trading fell.

The Fed made a statement indicating that they will probably not increase interest rates later this year as they had indicated previously.

People started getting nervous that stock market prices will fall.

Bond prices went down, so the public wanted to buy more bonds.