1. Using the model of supply and demand for bonds to illustrate and explain the impact of the following events on the equilibrium quantity of bonds outstanding and on equilibrium bond prices and yields (10 points) a. Inflationary expectations in the economy rise. b. All leading indicators point to stronger economic growth in the near future. The response of bond issuers dominates that of the bond purchasers. 2. Using the bond demand and supply model (graph ), explain the impact of central bank's quantitative easing policy. Clearly draw the graph and indicate which direction does the supply/demand of bond shift and for what reason. (5 points)
1. Using the model of supply and demand for bonds to illustrate and explain the impact of the following events on the equilibrium quantity of bonds outstanding and on equilibrium bond prices and yields (10 points) a. Inflationary expectations in the economy rise. b. All leading indicators point to stronger economic growth in the near future. The response of bond issuers dominates that of the bond purchasers. 2. Using the bond demand and supply model (graph ), explain the impact of central bank's quantitative easing policy. Clearly draw the graph and indicate which direction does the supply/demand of bond shift and for what reason. (5 points)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1. Using the model of supply and demand for bonds
to illustrate and explain the impact of the following
events on the equilibrium quantity of bonds
outstanding and on equilibrium bond prices and
yields (10 points)
a. Inflationary expectations in the economy rise.
b. All leading indicators point to stronger economic
growth in the near future. The response of bond
issuers dominates that of the bond purchasers.
2. Using the bond demand and supply model (graph
), explain the impact of central bank's quantitative
easing policy. Clearly draw the graph and indicate
which direction does the supply/demand of bond
shift and for what reason. (5 points)
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