Financial Markets and the Macroeconomy

The module explores the connection between financial markets (bond market, foreign exchange market) and the broader economy.
Understanding this connection helps in interpreting market shifts and expectations.
It also allows considering how changes, such as in monetary policy, impact aggregate supply and aggregate demand in the AS-AD model, influencing the macroeconomy.

Bond Market

Bonds are financial instruments used by corporations and governments to borrow funds from the public.
They are essentially debt contracts.
Bonds offer periodic interest payments and a principal repayment at maturity.
Some bonds are offered as zero-coupon bonds. In zero-coupon bonds, these financial contracts or bonds, are…