Use the following to answer questions .
Exhibit: The Bond Market
-(Exhibit: The Bond Market) Suppose the Fed takes action that shifts the demand curve from D to D′, as illustrated in Panel (a). As a result, the interest rate
A) increases and investment increases.
B) increases and investment decreases.
C) decreases and investment increases.
D) decreases and investment decreases.

Question

Use the following to answer questions .
Exhibit: The Bond Market 
-(Exhibit: The Bond Market) Suppose the Fed takes action that shifts the demand curve from D to D′, as illustrated in Panel (a). As a result, the interest rate
A) increases and investment increases. 
B) increases and investment decreases. 
C) decreases and investment increases. 
D) decreases and investment decreases.

Quizplus · Accepted Answer

When the Fed takes action that shifts the demand curve for bonds to the right (from D to D′), it typically indicates an increase in demand for bonds. This increased demand leads to higher bond prices and consequently lower interest rates. Lower interest rates generally encourage more investment.

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