Bond shifts and movements?

Question

(a) Explain the difference between shift and the movement along the bond demand curve?

I know that factors like price create a movement and things like wealth create shifts but I don't really know how to explain the difference, I can draw the difference but I have a hard time putting it in words.

(b) Explain the factors that can shift the supply of bond?

I'm thinking factors include the demand for bonds (more demand, shift in supply as well) but can't think of any more factors

(c) A simultaneous shift in the demand for bonds and supply of bonds will not alter the equilibrium interest rate. True/False/Uncertain. Explain.

Not sure for this one

Please help!

Answer 1

(a) when interest rates rise, there will be fewer number of  issuers of bonds/ lower amount of bonf issues  because cost of borrowing has increased or  a fewer resellers/ lower amount of sale of bonds because the value of the bond has fallen. This is the movement of bond sellers along the bond supply curve.

A shift in bond supply curve can occur when for example the bondholders find they have lower savings and want to shift to equity investing because the stock market returns have

(b) Among the factors that can cause shift in the bond supply curve are changes in income levels, chnages in returns in the equity market, fashion of investing in the markets for Golf , dafaults by bond issuers in the recent period.

(c) The answer is Uncertain because it all depends on the relative changes in the slopes of the demand and supply curves due to the shift and also on the direction of the shifts of the individual demand ansd supply curves and therefore the equilibrium values cannot be determined exactly