If analysts expect that the demand for loanable funds will increase and the supply of loanable funds will decrease, they would most likely expect interest rates to ____ and prices of existing bonds to ____.

Question

Quizplus · Accepted Answer

When the demand for loanable funds increases and the supply decreases, interest rates are expected to increase due to higher demand and lower supply. Higher interest rates lead to lower prices of existing bonds, as new bonds will offer higher yields, making existing ones less attractive.

If Analysts Expect That the Demand for Loanable Funds Will