Price of Bonds, P ($) 1,000 (i = 0%) 950 (i = 5.3%) 900 (i = 11.1%) P* = 850 (i* = 17.6%) 800 (i = 25.0%) 750 (i = 33.0%) A F 100 B With excess supply, the bond price falls to P* G With excess demand, the bond price rises to P* O 200 D H 300 400 Quantity of Bonds, B ($ billions) E 500 BS Bd

Price of Bonds, P ($) 1,000 (i = 0%) 950 (i = 5.3%) 900 (i = 11.1%) P* = 850 (i* = 17.6%) 800 (i = 25.0%) 750 (i = 33.0%) A F 100 B With excess supply, the bond price falls to P* G With excess demand, the bond price rises to P* O 200 D H 300 400 Quantity of Bonds, B ($ billions) E 500 BS Bd

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please explain this graph in words

Price of Bonds, P ($)
1,000
(i = 0%)
950
(i = 5.3%)
900
(i = 11.1%)
P* = 850
(i* = 17.6%)
800
(i = 25.0%)
750
(i = 33.0%)
A
F
100
B
With excess supply, the
bond price falls to P*
G
With excess
demand, the
bond price
rises to P*
O
D
H
200
300
400
Quantity of Bonds, B
($ billions)
E
500
BS
Bd

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