THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 121

CHAPTER The Behaviour of Interest Rates 89 To see how a change in each of these factors (holding all other factors constant) can shift the demand curve, let us look at some examples (As a study aid, Table 5-2 summarizes the effects of changes in these factors on the bond demand curve.) TA B L E - Factors That Shift the Demand Curve for Bonds Variable Wealth Change in Variable Change in Quantity Demanded at Each Bond Price * * Shift in Demand Curve P B d1 B d2 B Expected interest rate * + P B d2 B d1 B Expected inflation * + P B d2 B d1 B Riskiness of bonds relative to other assets P * + B d2 B d1 B Liquidity of bonds relative to other assets P * * B d1 B d2 B Note: Only increases (*) in the variables are shown The effect of decreases in the variables on the change in demand would be the opposite of those indicated in the remaining columns