An expansionary fiscal policy will result in the Treasury selling more bonds, the price of bonds falling, and interest rates rising.

Question

Quizplus · Accepted Answer

An expansionary fiscal policy involves government spending more money, which can lead to an increase in the budget deficit. To finance the deficit, the Treasury will sell more bonds to investors. As the supply of bonds increases, the price of bonds will fall due to the lower demand. In order to attract buyers, interest rates will rise.

An Expansionary Fiscal Policy Will Result in the Treasury Selling