Question at position 33 A decrease in expected inflation shifts the demand for bonds to the ________, the supply of bonds to the ________, and the interest rate _______.right; right; rises left; left; falls right; left; rises right; left; falls单项选择题
A
right; right; rises
B
left; left; falls
C
right; left; rises
D
right; left; falls

Question

Question at position 33 A decrease in expected inflation shifts the demand for bonds to the __, the supply of bonds to the , and the interest rate _.right; right; rises left; left; falls right; left; rises right; left; falls单项选择题

A

right; right; rises

B

left; left; falls

C

right; left; rises

D

right; left; falls

BlackTom AI · Accepted Answer

Because expected inflation falls, the real return on a fixed nominal bond rises, so investors want more bonds, while issuers face a higher real cost of borrowing and want to sell fewer.

1) Relevant knowledge points and concepts
- Nominal bond: pays fixed nominal amount in the future. Real return ≈ nominal interest rate − expected inflation (Fisher relation).  
- Bond demand increases when expected real return increases; bond supply (issuance) falls when the real cost of borrowing rises.  
- Bond price and nominal interest rate (yield) move inversely: i ≈ (Face value − Price)/Price, so a higher bond price implies a lower nominal interest rate.

2) Step-by-step reasoning
- Start at an initial equilibrium with given nominal interest and expected inflation.  
- If expected inflation decreases, the anticipated erosion of nominal payments falls, so the expected real payoff to holding existing nominal bonds rises (real return up). That makes bonds more attractive to investors, shifting the demand curve for bonds to the right.  
- Issuers (governments/firms) issuing nominal debt now face a higher real burden on the fixed nominal payments (because inflation no longer erodes the debt as much). They therefore are less willing to supply bonds at previous prices—so the supply curve shifts left.  
- Both shifts (demand right, supply left) put upward pressure on bond prices.

3) Intermediate calculation example (one-period bond)
- Suppose a bond pays $100 in one year. If price P = $90, yield i = 100/90 − 1 = 0.1111 (11.11%).  
- If the combined shifts raise the price to P = $95, yield i = 100/95 − 1 = 0.0526 (5.26%).  
- Price up → yield down, illustrating that the interest rate falls when demand rises and supply falls.

4) Why the correct answer is correct
- Decreased expected inflation raises expected real returns → bond demand shifts right.  
- Issuers reduce supply because the real cost of fixed nominal debt increases → supply shifts left.  
- Higher bond prices from these shifts imply lower nominal interest rates (yields) → interest rate falls.

5) Why the other options are incorrect
- "right; right; rises": supply would not shift right—issuers wouldn’t want to issue more when the real cost rises. A right supply shift would push yields up, inconsistent.  
- "left; left; falls": demand does not fall; investors prefer bonds when expected inflation falls.  
- "right; left; rises": although demand/right and supply/left are correct, the resulting price movement lowers yields, so interest rates fall, not rise.

Conclusion: The correct outcome is demand shifts right; supply shifts left; and the interest rate falls, matching the provided answer "right; left; falls."

Question at position 33 A decrease in expected inflation shifts the demand for bonds to the __, the supply of bonds to the , and the interest rate _.right; right; rises left; left; falls right; left; rises right; left; falls单项选择题

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Question at position 33 A decrease in expected inflation shifts the demand for bonds to the ________, the supply of bonds to the ________, and the interest rate _______.right; right; rises left; left; falls right; left; rises right; left; falls单项选择题

类似问题

Everything else held constant, when real estate prices are expected to decrease:

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You would be less willing to purchase U.S. Treasury bonds, other things equal, if:

Question at position 1 If the economy is entering an economic boom, in theory bond prices _______ and the quantity of bonds that clears the market ________lower, lowerslower, risesrise, risescould rise or lower, riserise, lowers

Question at position 9 If people expect real estate prices to increase significantly, the _____ curve for bonds will shift to the _____supply; rightsupply; leftdemand; rightdemand; left

更多留学生实用工具

希望你的学习变得更简单

Question at position 33 A decrease in expected inflation shifts the demand for bonds to the __, the supply of bonds to the , and the interest rate _.right; right; rises left; left; falls right; left; rises right; left; falls单项选择题

In the bond market, the bond demanders are the and the bond suppliers are the .

When an economy grows out of a recession, normally the demand for bonds and the supply of bonds , everything else held constant.

Question at position 1 If the economy is entering an economic boom, in theory bond prices _ and the quantity of bonds that clears the market __lower, lowerslower, risesrise, risescould rise or lower, riserise, lowers

Question at position 9 If people expect real estate prices to increase significantly, the _ curve for bonds will shift to the _supply; rightsupply; leftdemand; rightdemand; left