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forsale [732]
3 years ago
15

Suppose that the bond market and the money market both start out in equilibrium, then the Federal Reserve increases the money su

pply. The result will be a ______________ in the money market and a _________________ in the bond market, which will push bond prices _________________ and interest rates will ___________________ until a new equilibrium is reached.
a) shortage; surplus; down; fall
b) surplus; shortage; up; fall
c) shortage; surplus; down; rise
d) surplus; shortage; down; rise
Business
1 answer:
Trava [24]3 years ago
4 0

Answer:

b) surplus; shortage; up; fall

Explanation:

If the bond market and money market start out at equillibrum, and money supply is increased there will be an excess (surplus) of money over bonds.

That is more money to buy less bonds. The relative scarcity of bonds will result in a shortage (bond supply cannot meet demand).

As a result of the shortage price of bonds will increase because more people are looking for the scarce bonds.

Price of bonds has an inverse relationship with interest. As price increases interest rates will fall.

For example consider a zero coupon bond of $1,000, being sold for low price of $850. On maturity it will yield gain of $150.

If the price rises to $950 the yield will only be $50.

So as price increases and interest (yield) decreases, it will no more be attractive to investors and demand will reduce to meet the available supply of bonds.

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Secondary Ageing

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7 0
3 years ago
A contra-revenue account with a debit balance for returned good goods is called
inessss [21]

Answer:

yes

Explanation:

3 0
3 years ago
Which of the following would an economist classify as capital? Group of answer choices lawyer's computer. $50 bill. 100 shares o
snow_tiger [21]

Answer:

lawyer's computer.

Explanation:

For the economist a stock is capital that can earn income or good that person holds and can sold for a particular price.

In this case the lawyer's computer is a good that the lawyer owns and can be exchanged for money. Also the lawyer can use the computer to help treat court cases thereby earning income.

8 0
3 years ago
You are the manager of a firm that produces products X and Y at zero cost. You know that different types of consumers value your
arlik [135]

Answer and Explanation:

a)

If you charge $40 for X then everyone will buy as everyone is willing to pay atleast $40. this means all three groups buy that is 3*1000 buyers.So profit from X = 3000*40= $120,000

And since everyone is willing to willing to pay atleast $60 for Y again all three groups will buy so profit from Y =3000*60=$180,000

profits=$300,000

b)

If you charge $90 and $160 for X and Y respectively you will have only 1000 buyers for each product as others are unwilling to pay this much.

So profits = 1000*90 + 1000*160=$250,000

c)

for a bundle of X and Y buyers are willing to pay a total of $150, $210 and $200 across the three categories.

So everyone will buy a bundle of 1 X and 1 Y.

profits = 150*3000= $450,000

d)

If you charge $210 only the second will buy as they are willing to pay that much so profits =1000*210=$210,000

Also by selling X at $90 group 1 will buy X; profits=1000*90=$90,000

and by selling Y at $160 group 3 will buy Y; profits=1000*160=$160,000

total profits =$460,000

8 0
2 years ago
When the economy suffers a downturn and the incomes of many people decrease, vacationers are more likely to take car trips than
inysia [295]

Answer: Air travel is a normal good and vacation travel by car is an inferior good

Explanation: What is a normal good and what is an inferior good.

Normal goods are those goods for which the demand rises as consumer income rises. While inferior goods are goods whose demand increases when consumer income decreases.

This therefore means that the demand of inferior goods is inversely related to the income of the consumer.

From the question above, we can say that car trips are inferior goods while the air travel are normal goods.

3 0
3 years ago
Read 2 more answers
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