24Chp6-Econ3310 - Asset Demand Equilibrium Interest Rates...

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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 curve. 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 curve 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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This note was uploaded on 02/14/2012 for the course ECON 3310 taught by Professor Dix during the Fall '08 term at York University.

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