Which of the following factors will lead to an increase in interest rates?
A)Deflation
B)Federal deficit
C)Contraction
D)Recession
E)Trade surplus

Question

Quizplus · Accepted Answer

As the government runs a deficit, they will need to borrow money by issuing bonds, which will increase the supply of bonds on the market. This increase in supply will decrease the price of the bonds, and as bond prices and interest rates have an inverse relationship, interest rates will increase.

Which of the Following Factors Will Lead to an Increase