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Unformatted text preview: Asset Demand Equilibrium Interest Rates Market for Money: LPF Equilibrium Interest Rates in LPF Excess supply in the bond market.
Demand for bonds must increase along the bond demand
The price of bonds decreases.
The interest rate increases. EXCESS DEMAND: if M s < M d , people want more cash
than they have and sell bonds Excess demand in the bond market
Demand for bonds must decrease along the bond demand
The price of bonds increases.
The interest rate decreases. EXCESS SUPPLY: if M s > M d , people hold more cash than
desired want to buy more bonds Bond Market ...
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