Question

2. Consider the impact on the market for U.S. Treasury bonds when there are unusually high returns in the U.S. stock market. What changes in the market for U.S. Treasury bonds? What happens to the equilibrium, price, quantity, and interest rate on U.S. Treasury bonds? **Select ALL that apply. **

1. ___ Demand for U.S. Treasury bonds rises
2. ___ Demand for U.S. Treasury bonds falls
3. ___ Demand for U.S. Treasury bonds does not change
4. ___ quantity increases
5. ___ quantity decreases
6. ___ Supply of U.S. Treasury bonds rises
7. ___ Supply of U.S. Treasury bonds falls
8. ___ Supply of U.S Treasury bonds does not change
1. ___ price increases
10. ___ price decreases
11. ___ interest rate increases
50. ___ interest rate decreases

Answer 1

If there is high returns on stock, this will lead to people trying to invest in stock more,

So the following impacts will be made on the treasury bond market:

1. ___ Demand for U.S. Treasury bonds rises
2. Yes- Demand for U.S. Treasury bonds falls, as the stock is providing higher return people will be attracted to buy that more and the demand for its competitor like treasury bond will fall.
3. ___ Demand for U.S. Treasury bonds does not change
4. ___ quantity increases
5. Yes quantity decreases: equilibrium quantity will decrease with decrease in demand and supply reaming constant.
6. ___ Supply of U.S. Treasury bonds rises
7. ___ Supply of U.S. Treasury bonds falls
8. Yes :Supply of U.S Treasury bonds does not change: supply of these bonds will remain the same as that is regulated by government not the economy.
1. ___ price increases
10. Yes-price decreases: if the demand decreases and the supply remains the same, to meet an equilibrium point the price of the bond decreases with decrease in quantity.
11. Yes - interest rate increases: to meet the competitors demand, the interest rate on these bonds will increase to attract the customers.

• ___ interest rate decreases

so the answer is b, e, h, j, k