The demand curve and supply curve for one-year discount bonds with a face value of $1,040 are represented by the following equations: 8⁰: BS: Price=0.8Quantity +1,140 Price Quantity + 690 Suppose that, as a result of monetary policy actions, the Bank of Canada sells 80 bonds that it holds. Assume that bond demand and money demand are held constant. Which of the following statements is true? OA. If the Bank increases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 770. OB. If the Bank decreases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 810. OC. If the Bank increases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 610. OD. If the Bank decreases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 750. Calculate the effect on the equilibrium interest rate in this market, as a result of the Bank of Canada action. to %. (Round your intermediate The expected interest rate on a one-year discount bond will calculations to the nearest whole number. Round your final answer to two decimal places.)
The demand curve and supply curve for one-year discount bonds with a face value of $1,040 are represented by the following equations: 8⁰: BS: Price=0.8Quantity +1,140 Price Quantity + 690 Suppose that, as a result of monetary policy actions, the Bank of Canada sells 80 bonds that it holds. Assume that bond demand and money demand are held constant. Which of the following statements is true? OA. If the Bank increases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 770. OB. If the Bank decreases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 810. OC. If the Bank increases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 610. OD. If the Bank decreases the supply of bonds in the market by 80, at any given price, the bond supply equation will become Price = Quantity + 750. Calculate the effect on the equilibrium interest rate in this market, as a result of the Bank of Canada action. to %. (Round your intermediate The expected interest rate on a one-year discount bond will calculations to the nearest whole number. Round your final answer to two decimal places.)
Chapter25: Money, Banking, And The Federal Reserve System
Section: Chapter Questions
Problem 13P
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Transcribed Image Text:K
The demand curve and supply curve for one-year discount bonds with a face value of $1,040 are represented by the
following equations:
Bd.
BS:
Price H -0.8Quantity +1,140
Quantity + 690
Price =
Suppose that, as a result of monetary policy actions, the Bank of Canada sells 80 bonds that it holds. Assume that
bond demand and money demand are held constant. Which of the following statements is true?
OA. If the Bank increases the supply of bonds in the market by 80, at any given price, the bond supply equation
will become Price = Quantity + 770.
OB. If the Bank decreases the supply of bonds in the market by 80, at any given price, the bond supply equation
will become Price = Quantity + 810.
OC. If the Bank increases the supply of bonds in the market by 80, at any given price, the bond supply equation
will become Price = Quantity +610.
OD. If the Bank decreases the supply of bonds in the market by 80, at any given price, the bond supply equation
will become Price = Quantity + 750.
Calculate the effect on the equilibrium interest rate in this market, as a result of the Bank of Canada action.
to %. (Round your intermediate
The expected interest rate on a one-year discount bond will
calculations to the nearest whole number. Round your final answer to two decimal places.)
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