안녕하세요 선생님,

제가 이해하고 있는게 맞는지 확인하고 싶어서 질문을 드러요.

Country’s gov 가 increase borrowing = increase in demand of loanable fund = increase in real interest

So, - increase in bond prices (cuz of inverse relationship between real  interest rate)

      - decrease in the price level (cuz interest rate 은 borrowing cost 인데, borrowing cost 가 increase 한다는 것은 consumption, investment 등등 ad factor 들을 decrease 시킨다, 따라서 ad shifts to the left, which leads to a fall in the price level in the short run).

——————————————————저는 지금껏 이렇게 이해를 하고 있었는데, 어떤 문제 풀이를 하던 중에

Q) Assume that a country’s gov increases borrowing. What will most likely happen to the prices of previously issued bonds and the price level in the SR? 이서 답이

Bond price) decrease / price level : increase

라서 헷갈려서 질문을 드려요. 왜냐하면, 저는 price level 을 decrease 한다고 했거돈으ㅛ.