Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?
A) Households start saving a larger percentage of their income.
B) The economy moves from a boom to a recession.
C) The level of inflation begins to decline.
D) Corporations step up their expansion plans and thus increase their demand for capital.
E) The Federal Reserve uses monetary policy in an attempt to stimulate the economy.

Question

Quizplus · Accepted Answer

When corporations increase their demand for capital to finance expansion plans, they borrow more, leading to higher demand for loans. This increased demand can lead to higher interest rates on all debt securities as lenders raise rates to allocate the limited supply of loanable funds.

Which of the Following Would Be Most Likely to Lead