Business, 01.03.2021 21:50 makayla2583

Assume that bond market participants suddenly expect the Fed to substantially increase the money supply. a. Assuming no threat of inflation, how would bond prices be affected by this expectation?
b. Assuming that inflation may result, how would bond prices be affected?

Given your answer to (a) and (b), explain why expectations of the Fed’s money supply may sometimes call for bond market participants to disagree about how bond prices will be affected.

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