A decrease in the liquidity of corporate bonds, other things being equal, shifts the demand curve for corporate bonds to the ________ and the demand curve for Canada bonds shifts to the ________.
A) right; right
B) right; left
C) left; left
D) left; right

Question

Quizplus · Accepted Answer

A decrease in liquidity of corporate bonds makes them less attractive to investors, which causes a decrease in their demand. This shift of demand curve for corporate bonds is to the left. As investors now prefer Canada bonds as an alternative investment, the demand curve for Canada bonds will shift to the right.

A Decrease in the Liquidity of Corporate Bonds, Other Things