- Bond Price 10 000 9 800 9 600 9 400 9 200 9 000 8 800 8 600 8 400 8 200 8 000 7 800 7 600 7 400 7 200 7 1 (78.42 KiB) Viewed 20 times
7. The graph above shows the market for a one-year discount bondwith a face value of $10,000. The government's budget deficitincreases by $150 million and to finance that deficit it borrowsthat amount in this market. In other words, the government sells$150 million worth of this particular kind of bond in the market toraise funds. As a result of government's borrowing, the totalquantity of this bond demanded will equal _____ milliondollars. Of this total amount, the government will supply _____million dollars and the private sector ____ ? million dollars. Inother words, the government's borrowing crowds out _____ milliondollars of private sector borrowing.
Bond Price $10,000 $9,800 $9,600 $9,400 $9,200 $9,000 $8,800 $8,600 $8,400 $8,200 $8,000 $7,800 $7,600 $7,400 $7,200 $7,000 $0 $50 D $100 $150 $200 $250 $300 $million S $350 $400 $450