16. Business cycles and confidence   When confidence in the future decreases, bond prices ______________ ( decrease / increase / do not change ) and yields ______________ ( decrease / increase / do not change ) . As a result, the economy ______________ ( expands / contracts ) , which means that interest rates are _____________ ( procyclical / countercyclical ).   Adjust the following graphs to show the effects of a decrease in business confidence on the bond market, the market for loanable funds, and the market for goods and services.

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter21: Financial Markets, Saving, And Investment
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16. Business cycles and confidence

 

When confidence in the future decreases, bond prices ______________ ( decrease / increase / do not change ) and yields ______________ ( decrease / increase / do not change ) . As a result, the economy ______________ ( expands / contracts ) , which means that interest rates are _____________ ( procyclical / countercyclical ).

 

Adjust the following graphs to show the effects of a decrease in business confidence on the bond market, the market for loanable funds, and the market for goods and services.

 

BOND PRICE
INTEREST RATE
The Bond Market
QUANTITY OF BONDS
Supply
Demand
The Market for Loanable Funds
Supply
Demand
QUANTITY OF LOANABLE FUNDS
Demand
Supply
Demand
Supply
Transcribed Image Text:BOND PRICE INTEREST RATE The Bond Market QUANTITY OF BONDS Supply Demand The Market for Loanable Funds Supply Demand QUANTITY OF LOANABLE FUNDS Demand Supply Demand Supply
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