If the federal government runs a series of budget surpluses, we can expect that the: Group...

If the federal government runs a series of budget surpluses, we can expect that the:

Group of answer choices

The supply curve of bond shifts to the right

. The demand curve of bond shifts to the right.

The supply curve of bond shifts to the left.

The demand curve of bond shifts to the left.

Solutions

Expert Solution

When government is running with budget surplus it means a government is having more government revenue as compared to expenditure

So the government will require less bond value.

Bond is issued by the government when the government requires more money from the consumers in the economy

But here the case is opposite due to the the more surplus, government require no more money and it will supply less bond in the market

this will cause the shift of supply curve to the left

when the government runs with budget deficit then this will cause the shift of supply of bond to the right

Hence the answer is option C

Rahul Sunny answered 1 year ago

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