Question: For this question, you will answer how interest rates change due to business cycle recession using the two economic theories we covered: The asset market

 For this question, you will answer how interest rates change due

For this question, you will answer how interest rates change due to business cycle recession using the two economic theories we covered: The asset market approach and liquidity preference theory. Please start with the asset market approach and follovur the questions. Part I: Using the asset market approach of bonds, how interest rates change due to business mle recession. 1] Draw the initial bonds market for the asset market approach analysis. For the graphs, please make sure to indicate all the axis and curves. Label the initial equilibrium as "1\". 2] Now, let's suppose that there is an expectation of the business gcle recession in the near future. [Please note that this is our current concern!) Change the graph accordingly. Indicate any changes in the graph and label them clearly. Label the new equilibrium as \"2". I: Hint: the size ofthe movement in supply:- the size ofthe movement in demand} 3] Then, explain [in writing) what happens to the price of bonds, therefore the interest rate? Part II. Now, by using the liquidity preference model [money market], you need to explain the movement of interest rate clue to business recession. The scenario is the same as Part I. 4] Draw the initial money market approach analysis. For the graphs, please make sure to indicate all the axis and curves. Label the initial equilibrium as \"1\". 5] Now, le_t_'_s_ suppose that there is an expectation of the business gcle recession in the near future. [There will be no policy involved.) Change the money market graph accordingly. Indicate any changes in the graph and label them clearly. Label the new equilibrium as "2\". 6] Then, explain [in writing) what happens to the money market andI thereforeI the interest rate? 7] Is your analysis consistent throughout the bonds and money markets? What is your conclusion on the interest rates change with the economic recession? Economists say that the interest rates {without any policies injected} are \"pro-cyclical" rising when the economy is expanding and falling during recessions. Do you agree with this argument based on you r

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