(Note: In case finding difficulty in drawing online graph, students can draw graph manually and can use scan copy.)

Suppose an economy is passing through the expansionary phase of the business cycle. Using supply demand model of bonds, graphically examine. Impact on shift of demand and supply curves of the bonds Impact on price of bonds and expected interest rates. Based on your finding advice an investor, in such an economic condition, whether to invest in long-term bonds or short-term bonds and why? (4 points)