Figure 11-4 -Refer to Figure 11-4. The shift in the demand for bonds from D₁ to D₂, in Panel (b) will result in a A) lower interest rate and no change in investment. B) higher interest rate and lower investment. C) lower interest rate and higher investment. D) higher interest rate and higher investment.

Question

Quizplus · Accepted Answer

An increase in demand for bonds (shift from D₁ to D₂) will lead to a lower interest rate and a higher investment, as shown by the shift from point A to point B on the graph. This is because as more investors want to buy bonds, the price of bonds will go up and the yield (interest rate) will go down. Lower interest rates make investment in bonds more attractive, so the quantity of bonds demanded will increase.

Figure 11-4 -Refer to Figure 11-4. the Shift in the Demand for the Demand