Assume that the economy is in equilibrium. If aggregate demand decreases, nominal interest rates and bond prices will most likel

Question

PIT_PIT [208]

2 years ago

9

Assume that the economy is in equilibrium. If aggregate demand decreases, nominal interest rates and bond prices will most likel

y change in which of the following ways?

Advanced Placement (AP)

1 answer:

nikitadnepr [17] · Answer 1 · 2022-07-22T00:56:09+03:00

Interest rates up and bond prices down.
Higher interest rates make borrowing more expensive and thus demand from money decreases. Bond prices are inversely related to interest rates. This is a weird question because interest rates, which are set by the government, cause the change in aggregate demand not the other way around