class 3

Question 1

when the price of bonds goes up, how does that effect the bond demand and supply?

Answer 1

this causes the bond demand to go down and the bond supply to go up

Question 2

when the price of bonds goes down, how does that effect the bond demand and supply?

Answer 2

this causes the bond demand to go up and the bond supply to down

Question 3

how are the price of bonds and the demand of bonds related?

Answer 3

the price of bonds and demand of bonds are negatively related

Question 4

how are the price of bonds and the supply of bonds related?

Answer 4

the price of bonds and supply of bonds are positively related

Question 5

what is a market equilibrium?

Answer 5

occurs when the amount that people are willing to buy (demand) equals the amount that people are willing to sell (supply) at a given price

Question 6

what happens when bond demand is greater than bond supply?

Answer 6

there is excess demand and price will rise and interest rates will fall

Question 7

what happens when bond supply is greater than bond demand?

Answer 7

there is excess supply and price will fall and interest rate will rise

Question 8

what is a shift in the demand curve?

Answer 8

when the quantity demanded changes at each given price (or interest rates) of the bond in response to a change in some other factor

Question 9

what are the 4 things that can cause a shift in the bond demand curve?

Answer 9

wealth (right shift)
expected return (shift right)
risk (shift left)
liquidity (shift right)

Question 10

what are the 3 things that can cause a shift in the bond supply curve?

Answer 10

investment opportunity (shift right)
expected inflation (shift left)
government budget (shift right)

Question 11

what are business cycles?

Answer 11

the upward and downward movement of aggregate output In the economy