-In the figure above, the price of bonds would fall from P₂ to P₁ if ________.
A)there is a business cycle recession
B)there is a business cycle expansion
C)inflation is expected to increase in the future
D)inflation is expected to decrease in the future

Question

-In the figure above, the price of bonds would fall from P₂ to P₁ if ________.
A)there is a business cycle recession 
B)there is a business cycle expansion 
C)inflation is expected to increase in the future 
D)inflation is expected to decrease in the future

Quizplus · Accepted Answer

During a business cycle expansion, interest rates typically rise due to increased demand for credit, leading to a decrease in bond prices as they are inversely related to interest rates.

-In the Figure Above, the Price of Bonds Would Fall