When holding other factors constant, increased borrowing by the Treasury can result in a _______ required return and therefore _______ prices on existing bonds.

Question

Quizplus · Accepted Answer

Increased borrowing by the Treasury can lead to higher required returns on new bonds to attract investors, which in turn decreases the prices of existing bonds as they become less attractive in comparison.

When Holding Other Factors Constant, Increased Borrowing by the Treasury