Everything else held constant,during a business cycle expansion,the supply of bonds shifts to the ________ as businesses perceive more profitable investment opportunities,while the demand for bonds shifts to the ________ as a result of the increase in wealth generated by the economic expansion.
A)right;left
B)right;right
C)left;left
D)left;right

Question

Quizplus · Accepted Answer

During a business cycle expansion, businesses perceive more profitable investment opportunities, which leads to an increase in the supply of bonds, shifting the supply curve to the right. At the same time, the increase in wealth generated by the economic expansion creates more demand for bonds, shifting the demand curve to the right as well. Therefore, the demand and supply curves both shift to the right, resulting in an increase in the equilibrium quantity of bonds traded and a rise in bond prices.

Everything Else Held Constant,during a Business Cycle Expansion,the Supply of Bonds