Question

In the Bond Market

63. An increase in WEALTH affects Demand or Supply? 64. And shifts it Left or Right?

65. An increase in RISK affects Demand or Supply? 66. And shifts it Left or Right?

67. An increase in LIQUIDITY affects Demand or Supply? 68. And shifts it Left or Right?

69. An increase in EXPECTED PROFITABILITY OF INVESTMENT

OPPORTUNITIES affects Demand or Supply? 70. And shifts it Left or Right?

71. An increase in GOVT DEFICITS affects Demand or Supply? 72. And shifts it Left or Right?

Answer 1

63. Increase in Wealth affects Demand.
64. Demand curve shifts to the right.
Because as wealth rises, that wealth needs to be invested somewhere.

65. Increase in risk affects Demand.
66. Demand curve shifts to the left.
If bonds become risky to hold, people would look for other financial assets to hold.

67. An increase in liquidity affects Demand.
68. Demand will shift to the right.
More liquid asset is a good thing, as the asset can be quickly converted and traded easily.

69. An increase in expected profits will affect demand.
70. Demand curve will shift to the right.
If people think that their profits are expected to increase in the bond market, the demand for bonds will also increase.

71. An increase in government deficit affects supply.
72. Supply curve will shift to the right.
When governments run budget deficits, they often borrow by selling bonds, pushing the supply curve rightward .

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