The financial sector is the part of the economy made up of institutions that bring together lenders and borrowers. This includes institutions like banks.
Bond prices and interest rates have an inverse relationship. People prefer higher interest rates because they are given a greater rate of return. Most bonds pay a fixed rate of interest so as interest rates fall, they become more desirable which will push their price up. The opposite is true if interest rates are on a rise. Consumers are less interested in the fixed-rate interest rates that come with a bond, so they demand less of them, decreasing the price of the bonds.
Download our ap macro survival pack and get access to every resource you need to get a 5.
ap macro
💸 Unit 1: Basic Economic Concepts
📈 Unit 2: Economic Indicators and the Business Cycle
💲 Unit 3: National Income and Price Determination
💰 Unit 4: Financial Sector
⚖️ Unit 5: Long-Run Consequences of Stabilization Policies
🏗 Unit 6: Open Economy-International Trade and Finance
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