Draw the change in supply and/or demand for the bonds

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Beginning in 2008, economic conditions began to decline. Investors became unsure about the ability of private firms to repay outstanding obligations and it became difficult to tell high quality private investments from risky investments. Assume that P0 and Q0 correspond to the period of time before conditions begin to decline. On the two graphs below, draw the change in supply and/or demand for the bonds below as a result of decline in economic conditions in 2008. In the space below the graphs, indicate what happens to the interest rate: increases (↑), decreases (↓) or uncertain (?). Also, provide a two to three sentence explanation of why you shifted (or not) each of the curve(s).

Reference no: EM131245986

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