If the U.S. government's borrowing needs increase, all other factors constant the:

Question

Quizplus · Accepted Answer

An increase in the government's borrowing needs will lead to an increase in the supply of bonds, as the government will issue more bonds to finance its debt. This increase in supply will put downward pressure on the bond prices, leading to an increase in the yield (interest) offered on the bonds to attract buyers. Therefore, the demand for bonds may not decrease, but the supply will increase. Thus, the correct answer is B.

If the US Government's Borrowing Needs Increase, All Other Factors Constant The