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Please show me the necessary detivation (if applicable) and highlight the answer. Q1 Ch5 (10%) Using both the supply and demand for bonds and liquidity
Please show me the necessary detivation (if applicable) and highlight the answer.
Q1 Ch5 (10%) Using both the supply and demand for bonds and liquidity preference frame- works, show how interest rates are affected when the riskiness of bonds rises. Are the results the same in the two frameworks? (Answer the question by drawing the appropriate supply and demand diagrams) Q2 Ch 5 (15%) The demand curve and supply curve for one-year discount bonds with a face value of $1,000 are represented by the following equations: B: Price = -0.6* Quantity + 1140 B: Price = Quantity + 700 Suppose that, as a result of monetary policy actions, the Federal Reserve sells 80 bonds that it holds. Assume that bond demand and money demand are held constant. a. How does the Federal Reserve policy affect the bond supply equation? b. Calculate the effect of the Federal Reserve's action on the equilibrium interest rate in this market Step by Step Solution
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