The supply of a particular security appears to influence the term structure only
A) during recessions.
B) during inflationary periods.
C) in the short run.
D) in the long run.

Question

Quizplus · Accepted Answer

The supply of a particular security can influence the term structure in the short run. In particular, an increase in the supply of a security can lead to a decrease in the price of the security and an increase in its yield, which can affect the shape of the term structure. However, over the long run, other factors such as inflation, economic growth, and monetary policy tend to be more important in shaping the term structure. The supply of a security also tends to be less important during recessions or inflationary periods, as these broader economic conditions tend to dominate market movements.

The Supply of a Particular Security Appears to Influence the Term