Suppose that the Bank of Canada announces that it will begin increasing short-run interest rates at the end of 2022. Demonstrate graphically the effect of this announcement in the market for long-term government bonds. Provide an interpretation for any changes to the equilibrium price and quantity of bonds. Next demonstrate the effect of this announcement in the market for Treasury bills. Provide an interpretation for any changes to the equilibrium price and quantity of bonds. Is the effect of the announcement the same in the two markets? Why or why not?

2. Suppose that the Bank of Canada announces that it will begin increasing short-run interest rates at the end of 2022. Demonstrate graphically the effect of this announcement in the market for long-term government bonds. Provide an interpretation for any changes to the equilibrium price and quantity of bonds. Next demonstrate the effect of this announcement in the market for Treasury bills. Provide an interpretation for any changes to the equilibrium price and quantity of bonds. Is the effect of the announcement the same in the two markets? Why or why not? 2. Suppose that the Bank of Canada announces that it will begin increasing short-run interest rates at the end of 2022. Demonstrate graphically the effect of this announcement in the market for long-term government bonds. Provide an interpretation for any changes to the equilibrium price and quantity of bonds. Next demonstrate the effect of this announcement in the market for Treasury bills. Provide an interpretation for any changes to the equilibrium price and quantity of bonds. Is the effect of the announcement the same in the two markets? Why or why not