The demand curve and supply curve for one-year discount bonds with a face value of $1,030 are represented by the following equations: Bd. B Price Price - 0.6Quantity +1,160 Quantity + 710 Suppose that, as a result of monetary policy actions, the Federal Reserve sells 90 bonds that it holds. Assume that bond demand and money demand are held constant. Which of the following statements is true? A. If the Fed increases the supply of bonds in the market by 90, at any given price, the bond supply equation will become Price = Quantity + 620. OB. If the Fed increases the supply of bonds in the market by 90, at any given price, the bond supply equation will become Price = Quantity + 800. OC. If the Fed decreases the supply of bonds in the market by 90, at any given price, the bond supply equation will become Price = Quantity + 840. OD. If the Fed decreases the supply of bonds in the market by 90, at any given price, the bond supply equation will become Price = Quantity + 780. Calculate the effect on the equilibrium interest rate in this market, as a result of the Federal Reserve action. The expected interest rate on a one-year discount bond will increase to %. (Round your intermediate calculations to the nearest whole number. Round your final answer to two decimal places.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

Please give me correct answer with calculation otherwise i give multiple downvote

Note:-

Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism.

Answer completely and accurate answer.

Rest assured, you will receive an upvote if the answer is accurate.

The demand curve and supply curve for one-year discount bonds with a face value of $1,030 are represented by the following equations:
Price = -0.6Quantity + 1,160
Bd.
BS:
Price Quantity + 710
Suppose that, as a result of monetary policy actions, the Federal Reserve sells 90 bonds that it holds. Assume that bond demand and money demand are held constant. Which of the following statements is true?
A. If the Fed increases the supply of bonds in the market by 90, at any given price, the bond supply equation will become Price = Quantity + 620.
O B. If the Fed increases the supply of bonds in the market by 90, at any given price, the bond supply equation will become Price = Quantity + 800.
O C. If the Fed decreases the supply of bonds in the market by 90, at any given price, the bond supply equation will become Price = Quantity + 840.
O D. If the Fed decreases the supply of bonds in the market by 90, at any given price, the bond supply equation will become Price = Quantity + 780.
Calculate the effect on the equilibrium interest rate in this market, as a result of the Federal Reserve action.
The expected interest rate on a one-year discount bond will increase
to%. (Round your intermediate calculations to the nearest whole number. Round your final answer to two decimal places.)

Expert Solution

Step by step

Solved in 5 steps with 9 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions