VI. The U.S. Treasury and the Federal Reserve normally work together. But occasionally they disagree on the proper course of action. For example, what if the Treasury wanted to stimulate the economy by funding new government programs but the Federal Reserve felt fighting inflation was more important. The Treasury would print up and sell new government bonds. But the Federal Reserve would not buy them. 1. What would happen to bond prices? 2. What would happen to the interest rate? 3. What would happen to each component of aggregate demand (C+1+G+Xn) a. Consumption (C) b. Business Investment (1) c. Government Spending (G) d. Net Exports (Xn) 4. Did you know that foreign nationals buy a significant share of U.S. Government Bonds? a. When they buy those bonds, what happens to our trade balance? b. If they lost interest in buying those bonds or maybe even began to sell them, what would happen to bond prices and interest rates