Consider the perfectly competitive model applied to the market for corporate discount bonds. Initially the market clears in equilibrium at price PE and quantity QE. Using diagrams and economic analysis, describe separately the equilibrium effects of the following shocks: There's a new legislation introduced that decreases the amount of information that 1. corporations have to present in the financial statements. Assume this solely leads to an increase in the risk of investing in corporate bonds. 2. A technological breakthrough in fracking makes extraction of shale gas easier. The market participants believe this will decrease inflation rate in the future as costs of heating will drop. Now consider a perfectly competitive model applied to the market for US government discount bonds

Consider the perfectly competitive model applied to the market for corporate discount bonds. Initially the market clears in equilibrium at price PE and quantity QE. Using diagrams and economic analysis, describe separately the equilibrium effects of the following shocks: There's a new legislation introduced that decreases the amount of information that 1. corporations have to present in the financial statements. Assume this solely leads to an increase in the risk of investing in corporate bonds. 2. A technological breakthrough in fracking makes extraction of shale gas easier. The market participants believe this will decrease inflation rate in the future as costs of heating will drop. Now consider a perfectly competitive model applied to the market for US government discount bonds

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter5: Business And Economic Forecasting

Section: Chapter Questions

Problem 4E

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