When the corporate bond market becomes more 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 more liquid, investors tend to allocate more funds towards corporate bonds resulting in an increase in demand for corporate bonds shifting the demand curve for corporate bonds to the right. At the same time, the demand for Treasury bonds decreases, resulting in a shift of the demand curve for Treasury bonds to the left. Therefore, the correct answer is B.

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