Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393614077
Author: coppock, Lee; Mateer, Dirk
Publisher: W. W. Norton & Company
expand_more
expand_more
format_list_bulleted
Question
Chapter 23, Problem 4QFR
To determine
To explain:
The US Treasury securities and the reason for interest rates on Treasury securities is low. The changes that can happen to interest rates on treasury securities of U.S. and the reason for it.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Which of the following is (are) likely to lead to an increase in the demand for US bonds?
a.
All of the answers are correct
b.
Foreign interest rates decrease
c.
US government increases business taxes
d.
US interest rates decrease
If people worry about the United States defaulting on the national debt, what would you expect to happen to interest rates on U.S. Treasury securities? Why?
why does selling bonds by the Treasury to the financial market raise interest rates
Chapter 23 Solutions
Principles of Economics (Second Edition)
Knowledge Booster
Similar questions
- If government spending were increased, what would occur to interest ratesarrow_forwardSuppose that a large percentage of Country A’s exports go to Country B. Country B is currently experiencing a recession. How do you think this might affect the bond market in the Country A? Do you expect interest rates to increase or decrease in Country A? Briefly explain your answer (use computer graphs).arrow_forwardwhat is the formula for the rate on long-term Treasury bonds?arrow_forward
- What will happen to the price of bonds in an open market when the federal reserve sells bonds?arrow_forwardWhat is a mortgage? What were the important developments in the mortgage market during the years after 1970?arrow_forwardA 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 ratearrow_forward
- in 50 words. what is meant by the ‘cap’ on Social Security?arrow_forwardThe table below shows the amount of savings and borrowing in a market for loans to purchase homes, measured in millions of dollars, at various interest rates. What is the equilibrium interest rate (blank 1) and quantity (blank 2) in the capital financial market? Now, imagine that because of a shift in the perceptions of foreign investors, the supply curve shifts so that there will be $10 million less supplied at every interest rate. Calculate the new equilibrium interest rate (blank 3) and quantity (blank 4).arrow_forwardUse the following information to answer the next question. Security Treasury bills Corporate bonds Treasury notes Corporate stock Amount (in billions) $220 140 80 200 60 100 U.S. savings bonds Treasury bonds The public debt for the economy isarrow_forward
- While a television news reporter might state that “Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent,” a more precise account of the Fed’s action would be as follows: “Today the Fed told its bond traders to conduct open-market operations in such a way that the equilibrium federal funds rate would decrease to 5.25 percent.” “Today the Fed lowered the discount rate by a quarter of a percentage point, and this action will force the federal funds rate to drop by the same amount.” “Today the Fed took steps to decrease the money supply by an amount that is sufficient to decrease the federal funds rate to 5.25 percent.” “Today the Fed took a step toward contracting aggregate demand, and this was done by lowering the federal funds rate to 5.25 percent.”arrow_forwardWere low interest rates the underlying cause of the financial crisis? In the previous unit, we discussed the securitization of mortgages. The Economist magazine article entitled, “Crash Course” detailed that: “Investors sought out these securitized products because they appeared to be relatively safe while providing higher returns in a world of low interest rates. Economists still disagree over whether these low rates were the result of central bankers’ mistakes or broader shifts in the world economy.” "Crash Course". The Economist. 2013. Retrieved from: http://www.economist.com/news/schoolsbrief/21584534-effects-financial-crisis-are-still-being-felt-five-years-article Reflect on the information in the article and prepare a short answer to the following question: Were low interest rates the underlying cause of the financial crisis? Explain.arrow_forwardWhat is the reason why fiscal policy should be in tune with monetary policy when the economy is in the recession phase? What is the importance of the Central Bank in the financial market?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Macroeconomics: Principles and Policy (MindTap Co...EconomicsISBN:9781305280601Author:William J. Baumol, Alan S. BlinderPublisher:Cengage Learning
Macroeconomics: Principles and Policy (MindTap Co...
Economics
ISBN:9781305280601
Author:William J. Baumol, Alan S. Blinder
Publisher:Cengage Learning