ECON 2411-010: Money & Banking Fall 18 Quiz: Chapter 5 Quiz This Question: 10 pt
ID: 1136833 • Letter: E
Question
ECON 2411-010: Money & Banking Fall 18 Quiz: Chapter 5 Quiz This Question: 10 pts 10 of 108 r the demand for bends shits to the let, the price of bonds O A. increases, and interest rates rise O B. decreases, O C. decreases, and interest ates a O D' increases, and nterest rates fat and interest rates rise M the supply of bonds shits to the left, the price of When the O A. the price af bonds increases while the interest a and the Interest increase B both the price of bonds and interest rales decreas O C. the price of bonds decreases while the intrest a 00, ten te pre of bonds and interest rates novese Click to select your answerExplanation / Answer
If the demand for bonds will shift to the left, the price of the bond will decrease due to the direct relation between price and demand. The demand for bonds will decrease which will lead to fall in the prices if bonds.
Ans1.- C) decreases and interest rates falls
Because when the demand of bonds will fall, price of bonds will fall as well which will lead to fall in interest rates as people are not will to raise money through bonds and low interest rates will persuade them to do so.
Ans2- D) both the price of bonds and interest rates increases.
As the supply of bonds will shift to the left, the price of bonds will increase because the supply of bonds will be limited and demand remains the same which will lead to excess demand of bonds which will result in increase in prices and will also result in increase in interest rates as people will be willing to buy bonds at a higher interest rate because of less supply.
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