Where is the diagram and what is the question asking...
i think its important to read because you can get more information and knowledge from the book
I believe the answer is endogenous
Answer:
An decrease in interest rates generated by the FED buying bonds will, ceteris paribus, _increase __________ bond prices..
Explanation:
There is inverse relation between bond price and interest rate .
Bond price , sums up the present cash value of cash flow of bond. The cash flow is discounted by the prevailing interest rate . If it goes down , the NPV of cash flow increases . Hence the bond price increases.
Second theory is that , when prevailing interest rate decreases , demand of bond on which interest rate is fixed goes up . Hence its price increases.
