Answer to Question #96399 in Macroeconomics for Maryum

Question

Why are we assured that when the money and product markets are in equilibrium the bonds market will also be in equilibrium?

Answer 1

      Equilibrium in the Product, Money, Bonds Market.

           The money market equilibrium is attained when the rate of interest demanded for and supply of money are equal. The product market equilibrium is reached when aggregate demand for output becomes equal to aggregate supply of output. On the other hand, bond market equilibrium is reached when bond supply is equal to bond demand. The equilibriums of both money and product market are the essentials that are responsible the equilibrium state of the bonds in a market. Their relations are taken to be mutual.

   Reference

Eric M. Leeper ;<http://www.researchgate.net/figure/bond-market-equilibrium-supply-B-s-is-inelastic-and-demand-is-B-d-pt-pmt-fig3_256051488>