If the Treasury uses a relatively large proportion of ____ debt to finance a budget deficit, this would place ____ pressure on long-term yields.
A) short-term; downward
B) long-term; downward
C) short-term; upward
D) long-term; upward

Question

Quizplus · Accepted Answer

If the Treasury uses a relatively large proportion of long-term debt to finance a budget deficit, this would place upward pressure on long-term yields. This is because the increased supply of long-term debt will lead to an increase in demand for higher yields to compensate investors for holding longer-term debt.

If the Treasury Uses a Relatively Large Proportion of ____