Money and Banking

Chapter5 4. Explain why you would be much than or less imparting to buy long-run AT&T adheres under the following roam a. Trading in these bonds adjoins, making them easier to sell. more than, because if it is easier to sell bond this mean(a)s that liquidity of bonds increase. b. You expect a view as trade in stocks(stock prices are expected to decline) More because these bondss expected call in will increase compared to stocks. . Brokerage commission on stocks deliver less(prenominal) because the mode aim in brokerage commissions on stocks makes them more liquid. d. You expect relate rates to aerodynamic lift less(prenominal) because when interest rates increase the expected return decreases. e. Brokerage commission on bonds fall. More because the decrease in brokerage commissions on bonds makes bond more liquid. 7.Using both the liquidity preference fashion model and the generate and demand for bonds framework, show shy interest rates are procyclical If the econ omy is growing at that place is a business cycle expansion enrapture will result to a increase in generate of bonds this means that the supply curve will shift to the slump if this happens there will be a new equilibrium point and if everything is constant the new equilibrium point will be lower witch means that price of a bond will decrease and the interest rate will increase.If the economy grows the first effect we thunder mug see Is that the income will increase. When income increases the demand for money will increase work shift the demand curve to the right if every thing else is constant this will mean that the equilibrium point will change olibanum moving up and showing an increase in interest rate. 9. Find the Credit Markets column in the Wall Street Journal. Underline the statement in the column that explain bond price movements, and draw the appropriate supply and demand diagrams that support these statement.The column describes how the price of treasury bonds rose when the stock market faltered. The higher relative expected returns on bonds would indeed cause the quantity demanded to rise each price, shifting the demand curve to the right. The outcome is a rise in the equilibrium price and a fall in interest rates. Massive amount of supply of bonds is set to enter the market over the succeeding(a) month. The increase in supply would shift the supply curve to the right, causing the equilibrium price to fall.