Expectations that bond prices will be rising in the near future are likely to decrease the demand for money.

Question

Quizplus · Accepted Answer

When bond prices are expected to rise, investors are likely to sell their existing bonds to purchase new bonds with higher returns. This results in an increase in the supply of bonds in the market. As the demand for bonds increases, the demand for money decreases, as investors need less money to purchase a larger number of bonds. Therefore, expectations of bond price increases are likely to decrease the demand for money.

Expectations That Bond Prices Will Be Rising in the near Future