Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?
A) Households start saving a larger percentage of their income.
B) The economy moves from a boom to a recession.
C) The level of inflation begins to decline.
D) Corporations step up their expansion plans and thus increase their
Demand for capital.
E) The Central Bank uses monetary policy in an attempt to stimulate the economy.

Question

Quizplus · Accepted Answer

When corporations step up their expansion plans and increase their demand for capital, this puts upward pressure on interest rates in order to attract lenders. As demand for borrowing increases, lenders may ask for higher interest rates to make lending more attractive.

Which of the Following Would Be Most Likely to Lead