Economics (MindTap Course List)
Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 15, Problem 2QP
To determine

Change in bond prices and holding money.

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What will happen to Vladimir Putin after the war with Ukraine? What kind of consequences will he and Russia face? Is Russia running out of money?
Suppose most of your savings are in bonds and, according to an article in the Wall Street Journal, the Fed announces that it will carry out a contractionary monetary policy. What should you do? Should you continue to hold your bonds or should you move your funds into bank accounts?
Use the liquidity preferences model to show what will happen to the interest rate if it is below the equilibrium interest rate. Make sure you integrate the bond market changes into your answer.
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