Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 31, Problem 6E
To determine
To explain:
The effect on the prices of bond if the interest rate is lowered down.
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Students have asked these similar questions
Trace the impact of selling more bonds by government on bond prices, interest rates, investment, aggregate demand, real GDP, and the price level.
Stock prices fell throughout much of 2007 and 2008 and many investors decided to switch their funds into the bond market. What only about 30 percent of surveyed investors knew was that as bond prices rise, interest rates
a.
fall in reaction to the decreased demand for bonds.
b.
rise in reaction to the increased demand for bonds.
c.
fall in reaction to the increased demand for bonds.
d.
rise in reaction to the decreased demand for bonds.
What will happen in the bond market if the government imposes a limit on the amount of daily transactions?Which characteristic of an asset would be affected? How might it affect the interest rates?
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Similar questions
- Below you will find the Demand and Supply Curves for $250,000 bonds that mature in 18 years: Qd = 400,000 – 2(P) Qs = 3(P) – 100,000 If the Fed wants to move the interest rate to 5%, what would the bond price have to change to in order to achieve this?arrow_forward: Show graphically the effect of a rise in expected inflation on interest rates in the bond market.arrow_forwardWhat happens to interest rates in the market when bond prices fluctuate a lotarrow_forward
- A shift in the demand curve for bonds occurs when the quantity demanded changes at each given interest rate. When a shift takes place, there will be a new equilibrium value for the interest rate. Explain wealth may result in a shift in the demand for bonds.arrow_forwardA shift in the demand curve for bonds occurs when the quantity demanded changes at each given interest rate. When a shift takes place, there will be a new equilibrium value for the interest rate. Explain how risk and liquidity may result in a shift in the demand for bonds.arrow_forwardIf the supply of financial capital increases Interest rates will remain unchanged. Interest rates will increase. Interest rates will decrease.arrow_forward
- Which three factors will shift the supply of bonds to the left?arrow_forwardWhy Bond Buyers Fear Market Volatility, Not a Recession, Fund Flows Show?arrow_forwardAnswer the question based on the following information for a bond having no expiration date: bond price = $1,000; bond fixed annual interest payment = $100; bond annual interest rate = 10 percent. If the price of this bond increases to $1,250, the interest rate will Multiple Choice rise to 12.5 percent. fall to 2.5 percent. fall to 8 percent. rise to 18 percent. fall to 1.25 percent.arrow_forward
- prove that bond yields and bond prices are inversely related?arrow_forwardUsing the demand and supply curves for bonds, explain the effect of the following on the interest rates. a. A business cycle contraction b. Low inflationary expectationarrow_forwardIf it gets easier to use gold to pay in stores, then: Bond demand will increase. Bond demand will decrease. Bond supply will increase. Bond supply will decrease. The bond demand curve slopes ____ because a lower price level will _____ up, reduce expected return on holding bonds up, increase the supply of bonds down, increase the supply of bonds down, reduce expected return on holding bonds up, increase expected return on holding bonds down, increase expected return on holding bondsarrow_forward
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