When the corporate bond market becomes less liquid,other things equal,the demand curve for corporate bonds shifts to the ________ and the demand curve for Treasury bonds shifts to the ________.
A) right; right
B) right; left
C) left; left
D) left; right

Question

Quizplus · Accepted Answer

When the corporate bond market becomes less liquid, investors become less willing to hold corporate bonds, resulting in a decrease in demand. As a result, the demand curve for corporate bonds shifts to the left. On the other hand, since Treasury bonds are perceived as safer and more liquid than corporate bonds, investors may switch their investment demand to Treasury bonds, causing the demand curve for Treasury bonds to shift to the right. Therefore, the correct choice is D.

When the Corporate Bond Market Becomes Less Liquid,other Things Equal,the