SOLUTION MANUAL FOR #z #z
Money, #zBanking, #zFinancial #zMarkets #z& #zInstitutions #z2nd #zEdition #zfor #zBrandl #zMichael
Chapter #z2-24
CHAPTER #z2: #zMoney, #zMoney #zSupply, #zand #zInterest
2-1 #zSection #zReview
1. What #zis #zthe #zdifference #zbetween #zmoney #zand #zcurrency? #zWhen #zare #zthey #zthe #zsame? #zWhy
#zmight #zthey #zbe #zdifferent?
ANS: #zMoney #zis #zanything #zgenerally #zaccepted #zin #zexchange #zfor #zgoods #z& #zservices. #zCurrency #zis #zissued
#zby #za #zbank #zor #zthe #zgovernment, #zbut #zcurrency #zis #znot #znecessarily #zmoney. #zThey #zare #zthe #zsame
#zwhen #zthey #zare
accepted #zin #zexchange #zfor #zgoods #zand #zservices. #zCurrencies #zcan #zstop #zbeing #zmoney #zif #zpeople #zdon’t
#zaccept #zthem #zin #zexchange #zfor #zgoods #zand #zservices. #zIf #za #zgroup #zof #zpeople #zstop #zusing #zcurrency #zto
#zget #zgoods #zand #zservices #zbut #zinstead #zuse #zbananas, #zthen #zthe #zbananas #zare #zthe #zmoney.
2. How #zmany #zprices #zmust #za #zbarter #zeconomy #zhave #zif #zthe #zeconomy #zhas #zfour #zgoods? #zWhat #zif
#zit #zhas #z400 #zgoods? #zExplain #zwhy #zhaving #za #zmoney #zin #zthe #zsecond #zcase #zis #zbeneficial.
ANS: #z4 #zgoods #z= #z6 #zprices; #z400 #zgoods #z= #z79,800 #zprices. #zMoney #zallows #zus #zto #zspecialize #zand #zreduce
#zour #zsearch #zcost. # z Money #zallows #zus #zto #zreduce #zthe #znumber #zof #zstated #zprices #zwe #zneed.
3. You #zread #za #znews #zstory #zabout #za #zcountry #zthat #zis #zsuffering #zfrom #zrapid, #zongoing #zincreases #zin
#zthe #zcost #zof #zliving. #zWhich #zcharacteristic #zof #zmoney #zis #zbeing #zdirectly #znegatively #zimpacted #zin
#zthat #zeconomy?
a. Unit #zof #zaccount
b. Medium #zof #zexchange
c. Store #zof #zvalue
d. Double #zcoincidence #zof
wants #zANS:
#z # z C
2-2 #zSection #zReview
1. Bobby #zis #zconfused. #zHe #zstates: #z“Since #zprisoners #zare #znot #zallowed #zto #zsmoke #zin #zprisons #zany
#zlonger, #zRadford’s # z examples #zof #zcigarettes #zin #zPOW #zcamps #zno #zlonger #zapplies.” #zHow #zwould
#zyou #zexplain #zto #zBobby #zhow #zRadford’s #zstory #zdemonstrates #zthe #zconcepts #zof #zthe #zcriteria #zof
#zmoney, #zas #zwell #zas #zthe #zimportance #zof #zchanges #zin #zthe #zmoney #zsupply?
ANS: # z Any #zasset #zthat #zis #zable #zto #zbe #zstandardized, #zdivisible, #zdurable #zand #zin #zdemand #zcould #zbe
#zcurrency, #zas #zlong #zas #zit #zis #za #zmedium #zof #zexchange, #zis #za #zunit #zof #zaccount #zand #zhas #zstore #zof #zvalue.
# z Cigarettes #zwere #zmoney.
,2. Proponents of the Gold Standard, or using gold as money, often argue that it will keep inflation under
control. How does the experience of Europe in the sixteenth century raise doubts about that claim?
ANS: If people start to hoard gold or silver, there may not be enough money, and an economy could
slide into recession. If gold or silver increases too rapidly the economy could suffer inflation.
3. Ricardo and Friedman agree that if the money supply increases “too quickly” the following happens:
a. The rate of inflation decreases.
b. The rate of real economic growth increases.
c. The rate of inflation increases.
d. The level of employment decreases.
ANS: C
2-3 Section Review
1. A critic of money economics once stated, “if you cannot measure the money supply accurately, it is
not worth discussing at all.” How would you refute this statement?
ANS: Due to changes in financial markets, financial innovation and changes in the way banks operate,
led to the decline in the usefulness of M2 as a monetary aggregate.
2. Economists are searching for a “good” measurement of the money supply. What constitutes a good
measurement of the money supply?
ANS: To economists, a “good” measurement of the money supply is one that conforms to economic
theories regarding inflation and the economy. For example, if the money supply (according to a
particular measurement) increases faster than the growth rate of the economy, then economic theory
suggests that inflation should occur. On the other hand, if the money supply (according to a particular
measurement) increases too slowly relative to the growth rate of the economy, then economic theory
suggests that this will result in a recession. When the measurement of the money supply coincides with
these economic predictions, then that particular measurement has the potential to be a “good”
measurement of the money supply. During certain periods of time, both M1 and M2 have been
considered to be “good” measurements of the money supply. However, there have also been periods of
time where the changes in M1 or M2 did not coincide with economic theory.
3. Which of the following is the broadest or most inclusive measurement of the money supply?
a. M1
b. M2
c. M3
d. M0
ANS: B
,2-4 #zSection #zReview
1. Each #zperson #zmight #zhave #za #zdifferent #ztime #zpreference. #zExplain #zwhy #zan #zolder #zperson #zmight #zhave
#za #zhigher #zor #zlower #ztime #zpreference #zthan #za #zyoung #zperson.
ANS: #zAn #zolder #zperson #zmight #zhave #za #zhigh #ztime #zpreference, #zconsumer #znow #zvs. #zin #zthe #zfuture.
# z The #zolder #zperson #zwill #zplace #zhigher #zvalue #zon #zthe #zability #zto #zconsume #znow #zmore #zthan #zmoney #zin
#zthe #zfuture.
2. What #zis #zthe #zfuture #zvalue #zof #z$500 #zin #ztwo #zyears #zif #zthe #zinterest #zrate #zis #z4%? #zHow #zwould #zyou
#zexplain #zthis #zto #zsomeone #zwho #zhas #zno #ztraining #zin #zeconomics?
ANS: #z500(1.04)2 #z= #z$540.80. #zFor #zsomeone #zwithout #za #zbackground #zin #zeconomics, #zone #zcould #zexplain
#zthat #zmoney #zinvested #ztoday #zwill #zgrow #zover #ztime. #zThus, #zin #zorder #zto #zhave #z$500 #zin #zthe #zfuture,
#ztoday #zyou #zwould #zonly #zneed #zto #zinvest #zsome #zamount #zthat #zis #zless #zthan #z$500. #zHow #zmuch #zless
#zdepends #zon #zthe #zreturn #zon #zyour #zinvestment #z(the #zinterest #zrate).
3. If #zthe #zannual #zinterest #zrate #zis #z2%, #zwhat #zis #zthe #zquarterly #zinterest #zrate?
a. 0.0204
b. 0.0166
c. 0.005
d. 0.001
ANS: # z C
CHAPTER #z3: #zBonds #zand #zLoanable #zFunds
3-1 #zSection #zReview
1. Today, #zshoppers #z“clip #zcoupons” #zbefore #zthey #zgo #zshopping. #zExplain #zhow #zthese #zmodern
#zcoupons #zare #zsimilar #zand #zdissimilar #zto #zthe #z“coupons” #zreferred #zto #zin #zthe #zbond #zmarket.
ANS: #zToday, #zthough, #zmost #zbonds #zare #znot #zphysical #zprinted #zpieces #zof #zpaper #zwith #zcoupons #zthat
#zmust #zbe #zclipped #zoff #zand #zmailed #zto #zthe #zissuer.
2. The #zfact #zthat #zthe #zface #zvalue #zof #za #zbond #zdoes #znot #zchange #zover #zthe #zlife #zof #zthe #zbond
#zis #zgenerally #zconsidered #za #zbenefit #zto #zthe #zborrower. #zCan #zyou #zexplain #zwhy?
ANS: #zIf #zthe #zmarket #zconditions #zchange, #zsay #zrates #zdrop, #zthe #zface #zvalue #zwill #znot #zchange.
3. The #zrate #zof #zinterest #za #zbond #zpays #zis #zcalled #zthe #zbond’s:
a. face #zvalue.
b. coupon #zrate.
c. bond #zrating.
d. rating #zrate.
, ANS: # z B
3-2 #zSection #zReview
1. If #zyou #zhave #za #zbond #zwith #za #zface #zvalue #zof #z$1,000 #zand #za #zcoupon #zrate #zof #z2.25%, #zbut #zthe
#zmarket #zinterest #zrate #zfor #zsuch #zbonds #zis #z2.5%, #zwill #zyour #zbond #zsell #zat #zpar, #zat #za #zpremium, #zor
#zat #za #zdiscount? #zExplain #zwhy.
ANS: #zWhen #zmarket #zinterest #zrates #zrise #zrelative #zto #zcoupon #zrates #zon #zexisting #zbonds, #zthe #zprice #zof
#zthese #zexisting #zbonds #zdecrease #zbelow #zface #zvalue. #zThis #zmeans #zthat #zthis #zbond #zwill #zbe #zsold #zat #za
#zdiscount, #zsince #zthe #zmarket #zprice #zis #zbelow #zthe #zface #zvalue #zof #zthe #zbond.
2. If #zyou #zhave #za #zbond #zwith #za #zface #zvalue #zof #z$1,000 #zand #za #zcoupon #zrate #zof #z2.5%, #zbut #zthe
#zmarket #zinterest #zrate #zfor #zsuch #zbonds #zis #z2.25%, #zwill #zyour #zbond #zsell #zat #zpar, #zat #za #zpremium,
#zor #zat #za #zdiscount? #zExplain #zwhy.
ANS: #zPremium #zbecause #zthe #zcoupon #zrate #zis #zless #zthan #zthe #zmarket #zrate.
3. If #za #zthree-year #zbond #zwith #za #z$1,000 #zface #zvalue #zhas #za #zcoupon #zrate #zof #z3.5%, #zand #zthe
#zcurrent #zmarket #zinterest #zrate #zis #z2%, #zwhat #zis #zthe #zmarket #zprice #zof #zthe #zbond?
a. $956.75
b. $1,035.00
c. $1,043.30
d. $1,148.34
#zANS: # z c
3-3 #zSection #zReview
1. You #zread #zin #zthe #zfinancial #zpress #zthat #zmarket #zparticipants #zexpect #zstock #zprices #zto #zincrease
#zdramatically #zin #zthe #znear #zfuture, #zwhile #zat #zthe #zsame #ztime #zbusiness #zconfidence #zis #zincreasing.
#zExplain #zin #zwords #zand #zshow #zgraphically #zwhat #zwill #zhappen #zin #zthe #zbond #zmarket #zif #zthe #zfirst
#zchange #zis #zlarger #zin #zmagnitude #zthan #zthe #zsecond.
ANS: #zStocks #zand #zbonds #zare #zconsidered #zsubstitutes, #zthe #zreturn #zon #zholding #zstocks #zare #zgoing #zto
#zincrease, #zyou #zdo #znot #zwant #zto #zhold #zbonds. # z Demand #zfor #zbonds #zwill #zfall, #zrelative #zreturn #zto
#zbonds #zis #zdeclining.
Business #zconfidence #zis #zincreasing #zso #zfirms #zare #zgoing #zto #zfund #zmore #zprojects. # z They #zwill #zneed #zto
#zborrow #zmore #zmoney, #zor #zsell #zmore #zbonds #zto #zraise #zthose #zfunds. # z The #zsupply #zof #zbonds #zis
#zincreasing. # z Due #zto #zthe #zdecrease #zin #zdemand #zfor #zbonds #zis #zbigger #zthan #zthe #zsecond, #zwe #zcan
#zconclude #zequilibrium #zprice #zwill #zfall #zand #zequilibrium #zquantity #zwill #zincrease.
2. Stories #zappear #zin #zthe #zfinancial #zpress #zreporting #ztwo #zeconomic #zdevelopments: #zWealth #zlevels
#zin #zthe #zUnited #zStates #zare #zincreasing, #zwhile #zat #zthe #zsame #ztime #zthe #zrelative #zriskiness #zof #zbonds
#zissued #zby #zAmerican #zcorporations #zis #zdecreasing. #zExplain #zin #zwords #zwhat #zwill #zhappen #zin #zthe #zUS
#zbond #zmarket #zbecause #zof #zthese #ztwo #zevents.
ANS: #zIncreasing #zwealth #zlevels #zcause #zan #zincrease #zin #zthe #zdemand #zfor #zbonds #zbecause #zhouseholds
#zcan #zuse #zthis #zwealth #znot #zonly #zto #zincrease #zconsumption #zbut #zalso #zsave. #zSome #zportion #zof #zthese
new
its savings
#zway will#zbond
#zinto #zthe find #zmarket #zas #zhouseholds #zwill #zpurchase #zmore #zbonds #zat #zevery #zprice. #zAt #zthe
ifsame time,
#zdefault #zrisk #zdecreases, #zsavers #zwill #zbuy #zmore #zbonds #zas #zthey #zare #zconsidered #za #zrelatively #zsafer
asset. So,
Money, #zBanking, #zFinancial #zMarkets #z& #zInstitutions #z2nd #zEdition #zfor #zBrandl #zMichael
Chapter #z2-24
CHAPTER #z2: #zMoney, #zMoney #zSupply, #zand #zInterest
2-1 #zSection #zReview
1. What #zis #zthe #zdifference #zbetween #zmoney #zand #zcurrency? #zWhen #zare #zthey #zthe #zsame? #zWhy
#zmight #zthey #zbe #zdifferent?
ANS: #zMoney #zis #zanything #zgenerally #zaccepted #zin #zexchange #zfor #zgoods #z& #zservices. #zCurrency #zis #zissued
#zby #za #zbank #zor #zthe #zgovernment, #zbut #zcurrency #zis #znot #znecessarily #zmoney. #zThey #zare #zthe #zsame
#zwhen #zthey #zare
accepted #zin #zexchange #zfor #zgoods #zand #zservices. #zCurrencies #zcan #zstop #zbeing #zmoney #zif #zpeople #zdon’t
#zaccept #zthem #zin #zexchange #zfor #zgoods #zand #zservices. #zIf #za #zgroup #zof #zpeople #zstop #zusing #zcurrency #zto
#zget #zgoods #zand #zservices #zbut #zinstead #zuse #zbananas, #zthen #zthe #zbananas #zare #zthe #zmoney.
2. How #zmany #zprices #zmust #za #zbarter #zeconomy #zhave #zif #zthe #zeconomy #zhas #zfour #zgoods? #zWhat #zif
#zit #zhas #z400 #zgoods? #zExplain #zwhy #zhaving #za #zmoney #zin #zthe #zsecond #zcase #zis #zbeneficial.
ANS: #z4 #zgoods #z= #z6 #zprices; #z400 #zgoods #z= #z79,800 #zprices. #zMoney #zallows #zus #zto #zspecialize #zand #zreduce
#zour #zsearch #zcost. # z Money #zallows #zus #zto #zreduce #zthe #znumber #zof #zstated #zprices #zwe #zneed.
3. You #zread #za #znews #zstory #zabout #za #zcountry #zthat #zis #zsuffering #zfrom #zrapid, #zongoing #zincreases #zin
#zthe #zcost #zof #zliving. #zWhich #zcharacteristic #zof #zmoney #zis #zbeing #zdirectly #znegatively #zimpacted #zin
#zthat #zeconomy?
a. Unit #zof #zaccount
b. Medium #zof #zexchange
c. Store #zof #zvalue
d. Double #zcoincidence #zof
wants #zANS:
#z # z C
2-2 #zSection #zReview
1. Bobby #zis #zconfused. #zHe #zstates: #z“Since #zprisoners #zare #znot #zallowed #zto #zsmoke #zin #zprisons #zany
#zlonger, #zRadford’s # z examples #zof #zcigarettes #zin #zPOW #zcamps #zno #zlonger #zapplies.” #zHow #zwould
#zyou #zexplain #zto #zBobby #zhow #zRadford’s #zstory #zdemonstrates #zthe #zconcepts #zof #zthe #zcriteria #zof
#zmoney, #zas #zwell #zas #zthe #zimportance #zof #zchanges #zin #zthe #zmoney #zsupply?
ANS: # z Any #zasset #zthat #zis #zable #zto #zbe #zstandardized, #zdivisible, #zdurable #zand #zin #zdemand #zcould #zbe
#zcurrency, #zas #zlong #zas #zit #zis #za #zmedium #zof #zexchange, #zis #za #zunit #zof #zaccount #zand #zhas #zstore #zof #zvalue.
# z Cigarettes #zwere #zmoney.
,2. Proponents of the Gold Standard, or using gold as money, often argue that it will keep inflation under
control. How does the experience of Europe in the sixteenth century raise doubts about that claim?
ANS: If people start to hoard gold or silver, there may not be enough money, and an economy could
slide into recession. If gold or silver increases too rapidly the economy could suffer inflation.
3. Ricardo and Friedman agree that if the money supply increases “too quickly” the following happens:
a. The rate of inflation decreases.
b. The rate of real economic growth increases.
c. The rate of inflation increases.
d. The level of employment decreases.
ANS: C
2-3 Section Review
1. A critic of money economics once stated, “if you cannot measure the money supply accurately, it is
not worth discussing at all.” How would you refute this statement?
ANS: Due to changes in financial markets, financial innovation and changes in the way banks operate,
led to the decline in the usefulness of M2 as a monetary aggregate.
2. Economists are searching for a “good” measurement of the money supply. What constitutes a good
measurement of the money supply?
ANS: To economists, a “good” measurement of the money supply is one that conforms to economic
theories regarding inflation and the economy. For example, if the money supply (according to a
particular measurement) increases faster than the growth rate of the economy, then economic theory
suggests that inflation should occur. On the other hand, if the money supply (according to a particular
measurement) increases too slowly relative to the growth rate of the economy, then economic theory
suggests that this will result in a recession. When the measurement of the money supply coincides with
these economic predictions, then that particular measurement has the potential to be a “good”
measurement of the money supply. During certain periods of time, both M1 and M2 have been
considered to be “good” measurements of the money supply. However, there have also been periods of
time where the changes in M1 or M2 did not coincide with economic theory.
3. Which of the following is the broadest or most inclusive measurement of the money supply?
a. M1
b. M2
c. M3
d. M0
ANS: B
,2-4 #zSection #zReview
1. Each #zperson #zmight #zhave #za #zdifferent #ztime #zpreference. #zExplain #zwhy #zan #zolder #zperson #zmight #zhave
#za #zhigher #zor #zlower #ztime #zpreference #zthan #za #zyoung #zperson.
ANS: #zAn #zolder #zperson #zmight #zhave #za #zhigh #ztime #zpreference, #zconsumer #znow #zvs. #zin #zthe #zfuture.
# z The #zolder #zperson #zwill #zplace #zhigher #zvalue #zon #zthe #zability #zto #zconsume #znow #zmore #zthan #zmoney #zin
#zthe #zfuture.
2. What #zis #zthe #zfuture #zvalue #zof #z$500 #zin #ztwo #zyears #zif #zthe #zinterest #zrate #zis #z4%? #zHow #zwould #zyou
#zexplain #zthis #zto #zsomeone #zwho #zhas #zno #ztraining #zin #zeconomics?
ANS: #z500(1.04)2 #z= #z$540.80. #zFor #zsomeone #zwithout #za #zbackground #zin #zeconomics, #zone #zcould #zexplain
#zthat #zmoney #zinvested #ztoday #zwill #zgrow #zover #ztime. #zThus, #zin #zorder #zto #zhave #z$500 #zin #zthe #zfuture,
#ztoday #zyou #zwould #zonly #zneed #zto #zinvest #zsome #zamount #zthat #zis #zless #zthan #z$500. #zHow #zmuch #zless
#zdepends #zon #zthe #zreturn #zon #zyour #zinvestment #z(the #zinterest #zrate).
3. If #zthe #zannual #zinterest #zrate #zis #z2%, #zwhat #zis #zthe #zquarterly #zinterest #zrate?
a. 0.0204
b. 0.0166
c. 0.005
d. 0.001
ANS: # z C
CHAPTER #z3: #zBonds #zand #zLoanable #zFunds
3-1 #zSection #zReview
1. Today, #zshoppers #z“clip #zcoupons” #zbefore #zthey #zgo #zshopping. #zExplain #zhow #zthese #zmodern
#zcoupons #zare #zsimilar #zand #zdissimilar #zto #zthe #z“coupons” #zreferred #zto #zin #zthe #zbond #zmarket.
ANS: #zToday, #zthough, #zmost #zbonds #zare #znot #zphysical #zprinted #zpieces #zof #zpaper #zwith #zcoupons #zthat
#zmust #zbe #zclipped #zoff #zand #zmailed #zto #zthe #zissuer.
2. The #zfact #zthat #zthe #zface #zvalue #zof #za #zbond #zdoes #znot #zchange #zover #zthe #zlife #zof #zthe #zbond
#zis #zgenerally #zconsidered #za #zbenefit #zto #zthe #zborrower. #zCan #zyou #zexplain #zwhy?
ANS: #zIf #zthe #zmarket #zconditions #zchange, #zsay #zrates #zdrop, #zthe #zface #zvalue #zwill #znot #zchange.
3. The #zrate #zof #zinterest #za #zbond #zpays #zis #zcalled #zthe #zbond’s:
a. face #zvalue.
b. coupon #zrate.
c. bond #zrating.
d. rating #zrate.
, ANS: # z B
3-2 #zSection #zReview
1. If #zyou #zhave #za #zbond #zwith #za #zface #zvalue #zof #z$1,000 #zand #za #zcoupon #zrate #zof #z2.25%, #zbut #zthe
#zmarket #zinterest #zrate #zfor #zsuch #zbonds #zis #z2.5%, #zwill #zyour #zbond #zsell #zat #zpar, #zat #za #zpremium, #zor
#zat #za #zdiscount? #zExplain #zwhy.
ANS: #zWhen #zmarket #zinterest #zrates #zrise #zrelative #zto #zcoupon #zrates #zon #zexisting #zbonds, #zthe #zprice #zof
#zthese #zexisting #zbonds #zdecrease #zbelow #zface #zvalue. #zThis #zmeans #zthat #zthis #zbond #zwill #zbe #zsold #zat #za
#zdiscount, #zsince #zthe #zmarket #zprice #zis #zbelow #zthe #zface #zvalue #zof #zthe #zbond.
2. If #zyou #zhave #za #zbond #zwith #za #zface #zvalue #zof #z$1,000 #zand #za #zcoupon #zrate #zof #z2.5%, #zbut #zthe
#zmarket #zinterest #zrate #zfor #zsuch #zbonds #zis #z2.25%, #zwill #zyour #zbond #zsell #zat #zpar, #zat #za #zpremium,
#zor #zat #za #zdiscount? #zExplain #zwhy.
ANS: #zPremium #zbecause #zthe #zcoupon #zrate #zis #zless #zthan #zthe #zmarket #zrate.
3. If #za #zthree-year #zbond #zwith #za #z$1,000 #zface #zvalue #zhas #za #zcoupon #zrate #zof #z3.5%, #zand #zthe
#zcurrent #zmarket #zinterest #zrate #zis #z2%, #zwhat #zis #zthe #zmarket #zprice #zof #zthe #zbond?
a. $956.75
b. $1,035.00
c. $1,043.30
d. $1,148.34
#zANS: # z c
3-3 #zSection #zReview
1. You #zread #zin #zthe #zfinancial #zpress #zthat #zmarket #zparticipants #zexpect #zstock #zprices #zto #zincrease
#zdramatically #zin #zthe #znear #zfuture, #zwhile #zat #zthe #zsame #ztime #zbusiness #zconfidence #zis #zincreasing.
#zExplain #zin #zwords #zand #zshow #zgraphically #zwhat #zwill #zhappen #zin #zthe #zbond #zmarket #zif #zthe #zfirst
#zchange #zis #zlarger #zin #zmagnitude #zthan #zthe #zsecond.
ANS: #zStocks #zand #zbonds #zare #zconsidered #zsubstitutes, #zthe #zreturn #zon #zholding #zstocks #zare #zgoing #zto
#zincrease, #zyou #zdo #znot #zwant #zto #zhold #zbonds. # z Demand #zfor #zbonds #zwill #zfall, #zrelative #zreturn #zto
#zbonds #zis #zdeclining.
Business #zconfidence #zis #zincreasing #zso #zfirms #zare #zgoing #zto #zfund #zmore #zprojects. # z They #zwill #zneed #zto
#zborrow #zmore #zmoney, #zor #zsell #zmore #zbonds #zto #zraise #zthose #zfunds. # z The #zsupply #zof #zbonds #zis
#zincreasing. # z Due #zto #zthe #zdecrease #zin #zdemand #zfor #zbonds #zis #zbigger #zthan #zthe #zsecond, #zwe #zcan
#zconclude #zequilibrium #zprice #zwill #zfall #zand #zequilibrium #zquantity #zwill #zincrease.
2. Stories #zappear #zin #zthe #zfinancial #zpress #zreporting #ztwo #zeconomic #zdevelopments: #zWealth #zlevels
#zin #zthe #zUnited #zStates #zare #zincreasing, #zwhile #zat #zthe #zsame #ztime #zthe #zrelative #zriskiness #zof #zbonds
#zissued #zby #zAmerican #zcorporations #zis #zdecreasing. #zExplain #zin #zwords #zwhat #zwill #zhappen #zin #zthe #zUS
#zbond #zmarket #zbecause #zof #zthese #ztwo #zevents.
ANS: #zIncreasing #zwealth #zlevels #zcause #zan #zincrease #zin #zthe #zdemand #zfor #zbonds #zbecause #zhouseholds
#zcan #zuse #zthis #zwealth #znot #zonly #zto #zincrease #zconsumption #zbut #zalso #zsave. #zSome #zportion #zof #zthese
new
its savings
#zway will#zbond
#zinto #zthe find #zmarket #zas #zhouseholds #zwill #zpurchase #zmore #zbonds #zat #zevery #zprice. #zAt #zthe
ifsame time,
#zdefault #zrisk #zdecreases, #zsavers #zwill #zbuy #zmore #zbonds #zas #zthey #zare #zconsidered #za #zrelatively #zsafer
asset. So,
