You read in the financial press that the economy of Finland is sliding into a recession. What will happen in the bond market and the loanable funds market in Finland, ceteris paribus

In the case of Finland, if their economy is sliding into recession, it will create panic and fear among those who purchased bonds from their previous transaction. People will be forced to sell their bonds due to its associated risk attached to it.

The number of people will to sell will force the bond market to crash leading to fall in the prices of the bonds while the loanable funds will increase drastically.

Explanation:

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