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The Bond and Foreign Exchange Markets

24 April, 2015 - 11:52

Learning Objectives

  • Explain and illustrate how the bond market works and discuss the relationship between the rice of a bond and that bond’s interest rate.
  • Explain and illustrate the relationship between a change in demand for or supply of bonds and acroeconomic activity.
  • Explain and illustrate how the foreign exchange market works and how a change in demand or a country’s currency or a change in its supply affects macroeconomic activity.

In this section, we will look at the bond market and at the market for foreign exchange. Events in thesemarkets can affect the price level and output for the entire economy.