Use demand and supply analysis to explain what an expectation of FED rate hikes would have...
Use demand and supply analysis to explain what an expectation of FED rate hikes would have on bond prices?
Homework Answers
In the market for bonds, the demand curve shifts to the left when there is an expected rise in the market rate of interest. When it is expected that Fed is going to increase the key interest rates, the expected return is reduced and hence, firms demand fewer funds. Hence demand for bonds decreases. Demand curve shifts to the left. Bond prices are reduced while market rate of interest rate is increased because of inverse relation between bond prices and interest rate
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Use demand and supply analysis to explain what an expectation of
FED rate hikes would have...
1. How does expected inflation rate affects interest rate? Use the demand and supply in the...
1. How does expected inflation rate affects interest rate? Use the demand and supply in the bond market to explain your answer. 2. Differentiate the Expectation theory and Market Segmentation theory in explaining the yield curve?
A sale of bonds by the Fed generates O A. an increase in the demand for...
A sale of bonds by the Fed generates O A. an increase in the demand for money balances. O B. an increase in the demand for bonds and a rise in bond prices, OC. a decrease in the demand for money balances, O D. an increase in the supply of bonds and a fall in bond prices
Use the Supply and Demand analysis for blueberry muffins market. Describe what would be the impact...
Use the Supply and Demand analysis for blueberry muffins market. Describe what would be the impact of the following two events (at the same time) on market outcomes. A decrease in the price of blueberries AND a decrease in the price of strawberries muffins.
If the Fed has an interest-rate target, why will an increase in the demand for reserves...
If the Fed has an interest-rate target, why will an increase in the demand for reserves lead to a rise in the money supply? Use a graph of the market for reserves to explain.
Explain the effect on the demand for reserves or the supply of reserves of the following...
Explain the effect on the demand for reserves or the supply of reserves of the following Fed policy action: an open market sale of government securities a. this would decrease the demand for reserves b. this would increase the supply for reserves c. this would decrease the supply for reserves d. this would lower the interest rate at which the supply for reserves becomes horizontal
2. [10 points] Explain in detail what effect a Fed purchase of bonds will have on:...
2. [10 points] Explain in detail what effect a Fed purchase of bonds will have on: (1) the LM curve; and (2) the IS curve. 3. [10 points] Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in taxes and red uction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix...
AFederal Funds Rate Use the figure and supply and demand analysis of the market for reserves...
AFederal Funds Rate Use the figure and supply and demand analysis of the market for reserves to answer the following question. What would happen to the federal funds rate if it were initially at i and there was a switch from deposits into currency (holding everything else constant)? O A. The federal funds rate would stay at it. ** OB. The federal funds rate would increase to i OC. The federal funds rate would fall to 1 OD. The federal...
Using supply and demand analysis explain what will be the impact on the price and quantity...
Using supply and demand analysis explain what will be the impact on the price and quantity of ice cream sold- the cost of feeding dairy cows increases dramatically, more consumers are purchasing ice cream making machines and the price of chocolate syrup falls with a diagram as well
Explain by using graph how exchange rate determined Use supply and demand diagrams to verify answers....
Explain by using graph how exchange rate determined Use supply and demand diagrams to verify answers. A. Supply decreases and demand is constant B. Demand decreases and supply is constant. C. Supply increases and demand is constant D. Demand increases and supply increases E. Demand increases and supply is constant. F. Supply increases and demand decreases. G. Demand increases and supply decreases H. Demand decreases and supply decreases
If the Federal Reserve Bank purchases a large stock of bonds, what happens to money supply?...
If the Federal Reserve Bank purchases a large stock of bonds, what happens to money supply? Explain. Use the money market diagram (money demand-money supply diagram) to illustrate the effects of such an intervention on the equilibrium interest rate. Why does the interest rate change (increase or decrease) following the bond purchase by the Fed?
A sale of bonds by the Fed generates O A. an increase in the demand for money balances. O B. an increase in the demand for bonds and a rise in bond prices, OC. a decrease in the demand for money balances, O D. an increase in the supply of bonds and a fall in bond prices
2. [10 points] Explain in detail what effect a Fed purchase of bonds will have on: (1) the LM curve; and (2) the IS curve. 3. [10 points] Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in taxes and red uction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix...
AFederal Funds Rate Use the figure and supply and demand analysis of the market for reserves to answer the following question. What would happen to the federal funds rate if it were initially at i and there was a switch from deposits into currency (holding everything else constant)? O A. The federal funds rate would stay at it. ** OB. The federal funds rate would increase to i OC. The federal funds rate would fall to 1 OD. The federal...
Explain by using graph how exchange rate determined Use supply and demand diagrams to verify answers. A. Supply decreases and demand is constant B. Demand decreases and supply is constant. C. Supply increases and demand is constant D. Demand increases and supply increases E. Demand increases and supply is constant. F. Supply increases and demand decreases. G. Demand increases and supply decreases H. Demand decreases and supply decreases
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