Place the mouse cursor over the S or D labels to drag the Supply or Demand curves inward or outward.
Press the New Equilibrium button for Bond Price adjustment.
Press Reset to start over.
Questions:
Suppose the government increases its expenditure without increasing its revenue. What will happen to the equilibrium price and quantity of bonds in the market?
Click the reset button to return to the original equilibrium. Now, suppose investor perception of the riskiness of bonds relative to other assets increases. What will happen to the equilibrium price and quantity of bonds in the market?
Click reset to return to the original equilibrium. General business conditions affect both the demand for and the supply of bonds. Suppose business conditions deteriorate. Use the graph to see how equilibrium bond prices and quantities might be affected.
