Exam 4: Why Do Interest Rates Change

When the economy slips into a recession, normally the demand for bonds ________, the supply of bonds ________, and the interest rate ________.

How will a decrease in the federal government's budget deficit affect the equilibrium interest rate in the bond market? Explain using the bond demand and supply framework.

During a recession, the supply of bonds ________ and the supply curve shifts to the ________.

The loanable funds framework is easier to use when analyzing the effects of changes in ________, while the liquidity preference framework provides a simpler analysis of the effects from changes in income, the price level, and the supply of ________

Holding everything else constant, a decrease in the money supply causes

When people begin to expect a large run up in stock prices, the demand curve for bonds shifts to the ________ and the interest rate ________.