10-Chp5-Econ3310

10-Chp5-Econ3310 - Bond Market Equilibrium Interest Rates...

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Unformatted text preview: Bond Market Equilibrium Interest Rates Market for Money: LPF Equilibrium Interest Rates in LPF LIQUIDITY increased liquidity of bonds results in the demand curve shifting right RISK an increase in the riskiness of bonds causes the demand curve to shift to the left EXPECTED INFLATION an increase in the expected rate of inflation lowers the expected return for bonds, causing the demand curve to shift to the left EXPECTED RETURNS higher expected interest rates in the future lower the expected return for long-term bonds, shifting the demand curve to the left WEALTH in an expansion with growing wealth, the demand curve for bonds shifts to the right Shifts in the Demand for Bonds Asset Demand ...
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