Question
The interest rate is 4% (and this is an equilibrium rate). Show this with both bond...
The interest rate is 4% (and this is an equilibrium rate). Show this with both bond market (demand for and supply of bonds) and market for money (demand for and supply of money) diagrams. Next, the Fed increases the supply of money. What are the market conditions immediately after this action, that is at i=4%. Is this a good time to be a bond holder? Explain.
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