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O O $1,000 $980 $960 D S $940 $920 $900 $880 $860 Bond Price $840 $820 O $800 $780 $760 $740 $720 $700 So $50
O O $1,000 $980 $960 D S $940 $920 $900 $880 $860 Bond Price $840 $820 O $800 $780 $760 $740 $720 $700 So $50 $100 $150 $200 $250 $300 $350 $400 $450 $million The graph above shows the market for a one-year discount bond with a face value of $1,000. Currently the government is not borrowing in this market. Now, the government's budget deficit increases by $150 million and to finance that deficit it borrows in this market. This borrowing will cause the interest rate to change to: Choose the number closest to the answer. O 19.05 percent O 18.28 percent O 17.64 percent O 16.70 percent O 15.42 percentO $1,000 $980 $960 D S $940 $920 $900 $880 $860 Bond Price $840 $820 O $800 $780 $760 $740 $720 $700 SO $50 $100 $150 $200 $250 $300 $350 $400 $450 $million The graph above shows the market for a one-year discount bond with a face value of $1,000. Currently the government is not borrowing in this market. Now, the government's budget deficit increases by $150 million and to finance that deficit it borrows in this market. This government borrowing will crowd out X million dollars of private sector borrowing, where X equals: O 25 O 50 O 75 O 100 O 125 O 150O $1,000 $980 D S $960 $940 $920 $900 $880 $860 Bond Price $840 $820 O $800 $780 $760 $740 $720 $700 SO $50 $100 $150 $200 $250 $300 $350 $400 $450 $million The graph above shows the market for a one-year discount bond with a face value of $1,000. The new government promises to reduce the inflation rate by 7.25 percent. People have trust in their government and, so, they expect the inflation rate to decrease by 7.25 percent. According to the Fisher effect, the nominal interest rate will change to: Choose the number closest to the answer. O 2.04 percent O 4.17 percent O 6.38 percent O 7.80 percent O 9.60 percent
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