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Unformatted text preview: stimulate demand. The determined route is to buy government bonds, which increases the demand for them and raises their prices, pushing long-term interest rates down. The Fed will also continue with an earlier program that uses proceeds from its mortgage-related holdings to buy additional Treasury debt, at a rate of about $35 billion a month. In total, the Fed will buy $850 billion to $900 billion, which almost doubles the amount of Treasury debt it, currently holds. If the Fed succeeds, lower long-term interest rates should be present through the markets, which will push down rates for mortgages and corporate bonds. This could encourage homeowners to refinance into cheaper mortgages and push businesses to make investments rather than sitting on piles of cash....
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This note was uploaded on 02/02/2012 for the course BTE 234 taught by Professor Alanshort during the Fall '10 term at Miami University.
- Fall '10