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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Identify the state of the bond market (equilibrium, shortage, and surplus), given each of the following:

  1. a. Shortage in the money market
  2. b. Surplus in the money market
  3. c. Equilibrium in the money market

(a)

To determine

The effects of shortage in the market.

Explanation

If the Fed decreases the money supply, it will create a shortage of money in the money market. Due to the shortage, the individuals start to sell their bonds and the demand for bond tends to decrease...

(b)

To determine

Describe the surplus in money market.

(c)

To determine

Describe the equilibrium in the money market.

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