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Unformatted text preview: what happens when there is an increase in the government deficit financed by a new bond issue. as in #3. (What happened to equilibrium bond price?) (2) 5. Now give an example of something that would increase the equilibrium interest rate (other than a change in the government deficit/surplus). (2) Illustrate below how the change you suggest would change bonds prices/or interest rates using either a loanable funds diagram or a bond market diagram to illustrate (2)....
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- Fall '07