5. Which of the following is TRUE about the market for bonds? a) When Bd < Bs ,

Question

5. Which of the following is TRUE about the market for bonds?

a) When Bd < Bs , there is excess demand

b) When there is excess supply, the price will fall

c) When there is excess supply, the interest rate will rise

d) All of the above are true

e) only b. and c. are true

6. Which of the following is TRUE about the demand for bonds?

a) In an expansion with growing wealth, the demand curve for bonds shifts to the right

b) If today people expect higher interest rates in the future, then today’s expected return for long-term bonds will fall, which will shift today’s demand curve to the left

c) An increase in the expected rate of inflation lowers the expected return for bonds, causing the demand curve to shift to the left

d) All of the above are true

e) only a. and b. are true

7. Which of the following is TRUE about the demand for bonds?

a) An increase in the riskiness of bonds causes the demand curve to shift to the left

b) An increased liquidity of bonds results in the demand curve shifting right

c) An increased liquidity of bonds results in the demand curve shifting left

d) All of the above are true

e) only a. and b. are true

8. Which of the following is TRUE about the supply of bonds?

a) In an economic expansion, the supply curve shifts to the left

b) An increase in expected inflation shifts the supply curve for bonds to the right

c) An increase in the budget deficit shifts the supply curve to the right

d) All of the above are true

e) only b. and c. are true

Explanation / Answer

As nothing is mentioned expert is solving only 1 question.

5. Ans is e) I.e. b and c are true

a) is false because with Bd<Bs , situation of excess supply occurs rather than excess demand.

B) and (C) are correct because with more supply and less demand , price and interest rate of bond increases.

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