The president of the United States announces in a press conference that he will fight the higher inflation rate with a new anti-inflation program. Predict what will happen to interest rates if the public believes him. As a result of the president's announcement, people's expectations of inflation will ▼ rise fall , which causes the demand for bonds to shift to the ▼ right left. However, the lower expected inflation rate causes the cost of borrowing to ▼ rise fall , so the supply of bonds will ▼ decrease increase , which causes the supply curve for bonds to shift to the ▼ right left. The impact of this change in bond demand and supply will cause equilibrium interest rates t

Question

Grayson Olsen

Social Studies

18 October, 05:09

The president of the United States announces in a press conference that he will fight the higher inflation rate with a new anti-inflation program. Predict what will happen to interest rates if the public believes him. As a result of the president's announcement, people's expectations of inflation will ▼ rise fall , which causes the demand for bonds to shift to the ▼ right left. However, the lower expected inflation rate causes the cost of borrowing to ▼ rise fall , so the supply of bonds will ▼ decrease increase , which causes the supply curve for bonds to shift to the ▼ right left. The impact of this change in bond demand and supply will cause equilibrium interest rates t

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Niko Murphy · Answer 1

As a result of the president announcement people expectation of inflation will fall which causes the demand for bonds to shift to the right. However the lower expected inflation causes the cost of wages to rise, So the supply of bobs will decrease, which causes the supply curve for bonds to shift to the left.

The impact of this change in bond demand and supply will cause equilibrium interest rate to Decrease.