Homework: Chapter 4 Homework
Score: 0.5 of 1 pt
End of Chapter 3.1
Briefly explain what typically happens to interest rates during a recession. Use a demand and supply graph for
bonds to illustrate your answer.
A. The demand for bonds increases, while the supply of bonds decreases, resulting in a lower equilibrium
interest rate.
B. The demand for bonds increases, while the supply of bonds increases by a greater magnitude than
demand, resulting in a higher equilibrium interest rate.
C. The demand for bonds decreases, while the supply of bonds increases, resulting in a higher equilibrium
interest rate.
D. The demand for bonds decreases, while the supply of bonds decreases by a greater magnitude than
demand, resulting in a lower equilibrium interest rate.
Show your answer on the graph
1) Using the drawing tool, draw a new demand curve and supply curve. Properly label your curves.
2) Using the point drawing tool, indicate the equilibrium interest rate. Label your point $E_2$
Carefully follow the instructions above, and only draw the required objects.
