Lengthening the average maturity of the public debt tends to increase long-term interest rates relative to short-term interest rates.

Question

Quizplus · Accepted Answer

Lengthening the average maturity of public debt typically increases the supply of long-term bonds relative to short-term bonds. This can lead to higher long-term interest rates as investors demand a higher yield for holding longer-term securities, which are perceived as riskier compared to short-term securities.

Lengthening the Average Maturity of the Public Debt Tends to Increase