If the United States announces that it will borrow an additional $10 billion, this announcement will normally cause the bond traders to expect

Question

Quizplus · Accepted Answer

When the government announces borrowing an additional amount, it increases the supply of bonds in the market, which can lead to a decrease in bond prices and an increase in interest rates. Bond traders, anticipating the future interest rate movements, will sell bonds in anticipation of higher interest rates. Hence, the correct answer is B.

If the United States Announces That It Will Borrow an Additional