Suppose that savers become much more willing to purchase a certain type of municipal bond. The result will be that the bond's price will
A)fall relative to the price of U.S. Treasury securities but rise relative to the price of corporate bonds.
B)rise relative to the price of U.S. Treasury securities but fall relative to the price of corporate bonds.
C)rise relative to the prices of U.S. Treasury securities and corporate bonds.
D)fall relative to the prices of U.S. Treasury securities and corporate bonds.

Question

Quizplus · Accepted Answer

When savers become more willing to purchase a certain type of municipal bond, demand for that bond increases. This increased demand leads to a rise in the bond's price. Since the bond's price is rising due to increased demand, it will rise relative to the prices of other securities, such as U.S. Treasury securities and corporate bonds, assuming their demand remains constant or does not increase as much.

Suppose That Savers Become Much More Willing to Purchase a Certain