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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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