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Using the asset market model of supply and demand in the bond market, show graphically and explain intuitively the effect on UK gilt prices and
Using the asset market model of supply and demand in the bond market, show graphically and explain intuitively the effect on UK gilt prices and yields in each of the following cases: (a) Financial markets expect a future decrease in UK gilt prices (e.g. due to greater government financing needs in the future). (b) The adoption of inflation targeting by the Bank of England reduces inflation expectations. (c) Financial turmoil abroad leads to an increase in volatility in foreign bond markets
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