An economic expansion can lead to higher equilibrium bond yields if the supply of bonds shifts more than the demand for bonds.

Question

Quizplus · Accepted Answer

During an economic expansion, the demand for funds often increases as businesses seek to invest and expand, potentially leading to a higher supply of bonds to meet this financing need. If the supply of bonds increases more than the demand for them, it can lead to higher equilibrium bond yields as issuers must offer higher interest rates to attract buyers.

An Economic Expansion Can Lead to Higher Equilibrium Bond Yields