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drop down menu choices:The figure to the right depicts the bond market. Show what will happen to interest rates if prices in the bond market become

increase

decrease

remains unchanged

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Answer #1

If bond prices are more volatile, other assets such as gold will be demanded more.

Hence demand for bonds decreases and demand curve shifts to the left.

This is likely to reduce bond price and increase the yield on bond

Price of bonds, P Quantity of bonds, B

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