abbythatcher20
abbythatcher20 abbythatcher20
  • 10-03-2021
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Is a high interest rate more likely to lead to economic expansion or contraction? Explain your answer.

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carlenaloudermilk
carlenaloudermilk carlenaloudermilk
  • 10-03-2021

Answer: An expansion will cause the bond supply curve to shift right, which alone will decrease bond prices (increase the interest rate). But expansions also cause the demand for bonds to increase (the bond demand curve to shift right), which has the effect of increasing bond prices (and hence lowering bond yields).

Explanation: hope this help

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