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The demand curve and supply curve for one-year discount bonds with a face value of $1,050 are represented by the following equations: B: P=-D.8 *
The demand curve and supply curve for one-year discount bonds with a face value of $1,050 are represented by the following equations: B\": P=-D.8 * Q+ 1160 8': P = Q + 720 Suppose that, because of monetary policy actions, the Reserve Bank sells 90 bonds that it holds. Assume that bond demand and money demand are held constant. a) How does the Reserve Bank policy affect the bond supply equation? [3} Calculate the effect on the bond price and quantity and equilibrium interest rate in this market, because ofthe Reserve Bank's action. (1.2.2 Use a graph to illustrate the effect of expectations of more profitable investment opportunities on the bond market. (1.3.1 Citing relevant examples, briefly discuss the three types of nancial intermediaries
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