Calculate the effect on the equilibrium interest rate

Reference no: EM13212926

The demand curve and supply curve for one-year discount bonds with a face value of $1,000 are represented by the following equations: Bd: Price = -0.06 Quantity + 1140 Bs Price = Quantity + 700 suppose that, as a result of monetary policy actions, the federal reserves sells 80 bonds that it holds. Assume that bond demand and money demand are held constant. a. How does the Federal Reserve policy affect the bond supply equation? b. Calculate the effect on the equilibrium interest rate in this market, as a result of the Federal Reserve action.

Reference no: EM13212926

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