The effect on the bond market and the loan market in the move from a below-equilibrium interest rate to the equilibrium interest rate. The effect on the bond market and the loan market in the move from an above −equilibrium interest rate to the equilibrium interest rate should also be explained.

Question

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Answer 1

Question

Chapter 26, Problem 1P

To determine

To explain:

The effect on the bond market and the loan market in the move from a below-equilibrium interest rate to the equilibrium interest rate. The effect on the bond market and the loan market in the move from an above −equilibrium interest rate to the equilibrium interest rate should also be explained.

Expert Solution & Answer

Explanation of Solution

The demand of the money in the economy builds when the interest rate lags the equilibrium interest rate. In such situation, people will not invest in the bond market and will try to get a hold of the money as because of the fear of unprofitability. On the contrary, the requirement of the loan in the time period when the interest rate levels down will increase gradually resulting in the increment of the price of the loan.

The supply of the money in the economy builds when the interest rate exceeds the equilibrium interest rate because in such a situation, people will invest in the bond market and will try to spend the money in hand because of the probability of profit.On the contrary, the requirement of the loan in the time period when the interest rate levels up will increase gradually resulting in the decrement of the price of the loan.

Economics Concept Introduction

Bond market and loan market:

A financial market where people are involved in the issuing of new debt is known as bond market.The issuing of debt occurs in the form of the bonds. The fastest growing market in the recent economies of the countries is the loan market where the organisations provide loans to the people who are interested in buying and even forwardly sell them to the investors.

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Students have asked these similar questions

Please explain the relationship between bond market and money market. Explain the process how an increase in the money supply by the Fed lowers the interest rate through the BOND MARKET to reach the new equilbrium interest rate. Explain the impact of increase in GDP on the interest rate.

Changes in the money supply affect the interest rate through changes in the supply of loans, real GDP, the price level, and the expected inflation rate. True or False: The price-level effect describes the change in the interest rate due to a change in the expected inflation rate. False INTEREST RATE True The following graph shows the supply and demand curves in the market for loanable funds. Consider an increase in the expected inflation rate. Show the effect of this increase by dragging one or both curves on the graph. SLE QUANTITY OF LOANABLE FUNDS The income effect DLF The liquidity effect The expectations effect PLF SLF Which of the following refer to changes that affect the demand for loanable funds but not the supply? Check all that apply. The price-level effect (?

Describe how interest could be good or bad, depending on the situation, and explain why interest rates are currently so low?

Answer 2

Question

Chapter 26, Problem 1P

To determine

To explain:

The effect on the bond market and the loan market in the move from a below-equilibrium interest rate to the equilibrium interest rate. The effect on the bond market and the loan market in the move from an above −equilibrium interest rate to the equilibrium interest rate should also be explained.

Expert Solution & Answer

Explanation of Solution

The demand of the money in the economy builds when the interest rate lags the equilibrium interest rate. In such situation, people will not invest in the bond market and will try to get a hold of the money as because of the fear of unprofitability. On the contrary, the requirement of the loan in the time period when the interest rate levels down will increase gradually resulting in the increment of the price of the loan.

The supply of the money in the economy builds when the interest rate exceeds the equilibrium interest rate because in such a situation, people will invest in the bond market and will try to spend the money in hand because of the probability of profit.On the contrary, the requirement of the loan in the time period when the interest rate levels up will increase gradually resulting in the decrement of the price of the loan.

Economics Concept Introduction

Bond market and loan market:

A financial market where people are involved in the issuing of new debt is known as bond market.The issuing of debt occurs in the form of the bonds. The fastest growing market in the recent economies of the countries is the loan market where the organisations provide loans to the people who are interested in buying and even forwardly sell them to the investors.

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Answer 3

Question

Chapter 26, Problem 1P

To determine

To explain:

The effect on the bond market and the loan market in the move from a below-equilibrium interest rate to the equilibrium interest rate. The effect on the bond market and the loan market in the move from an above −equilibrium interest rate to the equilibrium interest rate should also be explained.

Expert Solution & Answer

Explanation of Solution

The demand of the money in the economy builds when the interest rate lags the equilibrium interest rate. In such situation, people will not invest in the bond market and will try to get a hold of the money as because of the fear of unprofitability. On the contrary, the requirement of the loan in the time period when the interest rate levels down will increase gradually resulting in the increment of the price of the loan.

The supply of the money in the economy builds when the interest rate exceeds the equilibrium interest rate because in such a situation, people will invest in the bond market and will try to spend the money in hand because of the probability of profit.On the contrary, the requirement of the loan in the time period when the interest rate levels up will increase gradually resulting in the decrement of the price of the loan.

Economics Concept Introduction

Bond market and loan market:

A financial market where people are involved in the issuing of new debt is known as bond market.The issuing of debt occurs in the form of the bonds. The fastest growing market in the recent economies of the countries is the loan market where the organisations provide loans to the people who are interested in buying and even forwardly sell them to the investors.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 26, Problem 1P

To determine

To explain:

The effect on the bond market and the loan market in the move from a below-equilibrium interest rate to the equilibrium interest rate. The effect on the bond market and the loan market in the move from an above −equilibrium interest rate to the equilibrium interest rate should also be explained.

Expert Solution & Answer

Explanation of Solution

The demand of the money in the economy builds when the interest rate lags the equilibrium interest rate. In such situation, people will not invest in the bond market and will try to get a hold of the money as because of the fear of unprofitability. On the contrary, the requirement of the loan in the time period when the interest rate levels down will increase gradually resulting in the increment of the price of the loan.

The supply of the money in the economy builds when the interest rate exceeds the equilibrium interest rate because in such a situation, people will invest in the bond market and will try to spend the money in hand because of the probability of profit.On the contrary, the requirement of the loan in the time period when the interest rate levels up will increase gradually resulting in the decrement of the price of the loan.

Economics Concept Introduction

Bond market and loan market:

A financial market where people are involved in the issuing of new debt is known as bond market.The issuing of debt occurs in the form of the bonds. The fastest growing market in the recent economies of the countries is the loan market where the organisations provide loans to the people who are interested in buying and even forwardly sell them to the investors.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 26, Problem 1P

To determine

To explain:

The effect on the bond market and the loan market in the move from a below-equilibrium interest rate to the equilibrium interest rate. The effect on the bond market and the loan market in the move from an above −equilibrium interest rate to the equilibrium interest rate should also be explained.

Expert Solution & Answer

Explanation of Solution

The demand of the money in the economy builds when the interest rate lags the equilibrium interest rate. In such situation, people will not invest in the bond market and will try to get a hold of the money as because of the fear of unprofitability. On the contrary, the requirement of the loan in the time period when the interest rate levels down will increase gradually resulting in the increment of the price of the loan.

The supply of the money in the economy builds when the interest rate exceeds the equilibrium interest rate because in such a situation, people will invest in the bond market and will try to spend the money in hand because of the probability of profit.On the contrary, the requirement of the loan in the time period when the interest rate levels up will increase gradually resulting in the decrement of the price of the loan.

Economics Concept Introduction

Bond market and loan market:

A financial market where people are involved in the issuing of new debt is known as bond market.The issuing of debt occurs in the form of the bonds. The fastest growing market in the recent economies of the countries is the loan market where the organisations provide loans to the people who are interested in buying and even forwardly sell them to the investors.

Answer 6

Chapter 26, Problem 1P

To determine

To explain:

The effect on the bond market and the loan market in the move from a below-equilibrium interest rate to the equilibrium interest rate. The effect on the bond market and the loan market in the move from an above −equilibrium interest rate to the equilibrium interest rate should also be explained.

Expert Solution & Answer

Explanation of Solution

The demand of the money in the economy builds when the interest rate lags the equilibrium interest rate. In such situation, people will not invest in the bond market and will try to get a hold of the money as because of the fear of unprofitability. On the contrary, the requirement of the loan in the time period when the interest rate levels down will increase gradually resulting in the increment of the price of the loan.

The supply of the money in the economy builds when the interest rate exceeds the equilibrium interest rate because in such a situation, people will invest in the bond market and will try to spend the money in hand because of the probability of profit.On the contrary, the requirement of the loan in the time period when the interest rate levels up will increase gradually resulting in the decrement of the price of the loan.

Economics Concept Introduction

Bond market and loan market:

A financial market where people are involved in the issuing of new debt is known as bond market.The issuing of debt occurs in the form of the bonds. The fastest growing market in the recent economies of the countries is the loan market where the organisations provide loans to the people who are interested in buying and even forwardly sell them to the investors.

Answer 7

Chapter 26, Problem 1P

To determine

To explain:

The effect on the bond market and the loan market in the move from a below-equilibrium interest rate to the equilibrium interest rate. The effect on the bond market and the loan market in the move from an above −equilibrium interest rate to the equilibrium interest rate should also be explained.

Answer 8

Expert Solution & Answer

Explanation of Solution

The demand of the money in the economy builds when the interest rate lags the equilibrium interest rate. In such situation, people will not invest in the bond market and will try to get a hold of the money as because of the fear of unprofitability. On the contrary, the requirement of the loan in the time period when the interest rate levels down will increase gradually resulting in the increment of the price of the loan.

The supply of the money in the economy builds when the interest rate exceeds the equilibrium interest rate because in such a situation, people will invest in the bond market and will try to spend the money in hand because of the probability of profit.On the contrary, the requirement of the loan in the time period when the interest rate levels up will increase gradually resulting in the decrement of the price of the loan.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Bond market and loan market:

A financial market where people are involved in the issuing of new debt is known as bond market.The issuing of debt occurs in the form of the bonds. The fastest growing market in the recent economies of the countries is the loan market where the organisations provide loans to the people who are interested in buying and even forwardly sell them to the investors.

Answer 12

Ch. 26 - Prob. 1P Ch. 26 - Prob. 2P Ch. 26 - Prob. 3P

The effect on the bond market and the loan market in the move from a below-equilibrium interest rate to the equilibrium interest rate. The effect on the bond market and the loan market in the move from an above −equilibrium interest rate to the equilibrium interest rate should also be explained.

Explanation of Solution

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Chapter 26 Solutions