Which circumstance would be most likely to lead to higher interest rates on all debt securities in the economy?
A)Households start saving a larger percentage of their income.
B)The economy moves from a boom to a recession.
C)The level of inflation begins to decline.
D)With expansion plans, corporate increase their demand for capital.

Question

Quizplus · Accepted Answer

When corporations increase their demand for capital to fund their expansion plans, this creates more competition for loans and drives up interest rates on all debt securities in the economy. As a result, investors will demand higher yields to compensate for the increased risk associated with lending to corporations. The other options (A, B, and C) may have an impact on interest rates, but they are not as direct or significant as increased demand for capital from corporations.

Which Circumstance Would Be Most Likely to Lead to Higher