When people begin to expect a large run up in stock prices,the demand curve for bonds shifts to the ________ and the interest rate ________.
A) right; rises
B) right; falls
C) left; falls
D) left; rises

Question

Quizplus · Accepted Answer

When people expect a large run-up in stock prices, they are more likely to sell bonds to buy stocks, shifting the demand curve for bonds to the left. This decrease in demand for bonds causes their prices to fall and interest rates to rise, as bond prices and interest rates move inversely.

When People Begin to Expect a Large Run Up in Stock