The demand curve and supply curve for one‐year discount bonds with a face value of $1,050 are represented by the following equations: Bd: P = −0.8 * Q + 1160 Bs: P = Q + 720 Suppose that, because of monetary policy actions, the Reserve Bank sells 90 bonds that it holds. Assume that bond demand and money demand are held constant. calculate the effect on the bond price and quantity and equilibrium interest rate in this market, because of the Reserve Bank’s actio
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The
Bd: P = −0.8 * Q + 1160
Bs: P = Q + 720
Suppose that, because of
Assume that bond demand and money demand are held constant.
calculate the effect on the
interest rate in this market, because of the Reserve Bank’s action
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- The demand curve and supply curve for one-year discount bonds with a face value of $1,050 are represented by the following equations: Bd: Price = - 0.7Quantity + 1,100 BS: Price = Quantity + 690 Suppose that, as a result of monetary policy actions, the Federal Reserve sells 110 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 decreases the supply of bonds in the market by 110, at any given price, the bond supply equation will become Price = Quantity + 780. O B. If the Fed decreases the supply of bonds in the market by 110, at any given price, the bond supply equation will become Price = Quantity + 840. C. If the Fed increases the supply of bonds in the market by 110, at any given price, the bond supply equation will become Price = Quantity + 580. D. If the Fed increases the supply of bonds in the market by 110, at any given price, the bond supply equation will become Price = Quantity + 800.…The demand curve and supply Curve for one-year discount bonds with a face value of $1,050 are represented by the following equations: Bd: BS: Price=0.8Quantity + 1,120 Price = Quantity +680 Suppose that, as a result of monetary policy actions, the Federal Reserve sells 70 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 70, at any given price, the bond supply equation will become Price = Quantity + 610. OB. If the Fed decreases the supply of bonds in the market by 70, at any given price, the bond supply equation will become Price = Quantity +790. OC. If the Fed increases the supply of bonds in the market by 70, at any given price, the bond supply equation will become Price = Quantity + 750. D. If the Fed decreases the supply of bonds in the market by 70, at any given price, the bond supply equation will become Price = Quantity + 730. Calculate the…The demand curve and supply curve for one-year discount bonds with a face value of $1,050 are represented by the following equations: Bd. Price = -0.6Quantity + 1,160 BS: Price Quantity + 720 Suppose that, as a result of monetary policy actions, the Federal Reserve sells 80 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 80, at any given price, the bond supply equation will become Price = Quantity + 640. OB. If the Fed decreases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 780. O C. If the Fed decreases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 840. O D. If the Fed increases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 800.
- 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. Price = BS: Price = -0.8Quantity +1,100 Quantity + 710 Suppose that, as a result of monetary policy actions, the Federal Reserve sells 60 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 decreases the supply of bonds in the market by 60, at any given price, the bond supply equation will become Price = Quantity + 750. B. If the Fed increases the supply of bonds in the market by 60, at any given price, the bond supply equation will become Price = Quantity + 650. C. If the Fed increases the supply of bonds in the market by 60, at any given price, the bond supply equation will become Price = Quantity + 770. OD. If the Fed decreases the supply of bonds in the market by 60, at any given price, the bond supply equation will become Price = Quantity + 810. Calculate the…Using both the liquidity preference framework and the supply and demand for bonds framework, show why interest rates are procyclical (rising when the economy is expanding and falling during recessions). Using the graph to the right, show the effect on the bond supply and the bond demand curve. Properly label your curves. Indicate the new equilibrium interest rate and quantity of bonds and label it 2. Choose the correct answer below. O A. B. B W W B B Quantity of Bonds, B Quantity of Bonds, B C. B Quantity of Bonds, B Q O D. BS B Quantity of Bonds, B C Price of Bonds, P Quantity of Bonds, B B₁ B QThe demand curve and supply curve for one‐year discount bonds with a face value of $1,050 are represented by the following equations: Bd: Price = −0.8 * Quantity + 1160 Bs: Price = Quantity + 720 How does the Reserve Bank policy affect the bond supply equation?
- See image for inforamtion to answer the questions below. 1) What is the equilibrium federal funds rate? 2) The Fed wishes to adjust interest rates to 6%. What open-market operation should it carry out? What sort of effect will this open-market operation have on bond prices? 3) Is this an expansionary or contractionary monetary policy? Explain the linkages in the causal chain when the Fed conducts this monetary policy. 4) What will be the ultimate effect on GDP and P?Find readings or videos on the internet with information on the factors that move the demand and supply curves of bonds, their effect on interest rates. Answer the following questions: 1. One way the Fed decreases the money supply is by selling bonds to the public. Using supply and demand analysis for bonds, show what effect this action has on interest rates. 2. Using the supply and demand of bonds, show why interest rates are pro-cyclical (they increase when the economy is expanding and decrease during recession). 3. What effect can a sudden increase in gold price volatility have on interest rates? 4. Using a supply and demand analysis for bonds, show the effect on interest rates when the risk of the bond increases.If it gets easier to use gold to pay in stores, then: Bond demand will increase. Bond demand will decrease. Bond supply will increase. Bond supply will decrease. The bond demand curve slopes ____ because a lower price level will _____ up, reduce expected return on holding bonds up, increase the supply of bonds down, increase the supply of bonds down, reduce expected return on holding bonds up, increase expected return on holding bonds down, increase expected return on holding bonds
- Excerpt from FOMC Statement Released November 16, 1999 “The Federal Open Market Committee today voted to raise its target for the federal funds rate by 25 basis points to 5-1/2 percent. In a related action, the Board of Governors approved a 25 basis point increase in the discount rate to 5 percent. Although cost pressures appear generally contained, risks to sustainable growth persist. Despite tentative evidence of a slowing in certain interest-sensitive sectors of the economy and of accelerating productivity, the expansion of activity continues in excess of the economy's growth potential. As a consequence, the pool of available workers willing to take jobs has been drawn down further in recent months, a trend that must eventually be contained if inflationary imbalances are to remain in check and economic expansion continue.” Identify whether the policy action is fiscal or monetary. Identify whether the policy action is expansionary or contractionary. Draw and label the change that…what is the formula for the rate on long-term Treasury bonds?A recent newspaper article discussed the implications of investors' fears of a larger-than-expected budget deficit in Italy. In one well-labeled graph of the bond market for Italy, show how the following items respond and provide an intuitive explanation for each. bond demand bond supply equilibrium price equilibrium interest rate