Briefly explain the factors which shift the bond demand-00149
This subjective question is related to the book/course
vu bt301 Introduction to Biotechnology.
It can also be found in
vu bt301 Mid Term Solved Past Paper No. 2.
Question 1: Briefly explain the factors which shift the bond demand.
Answer:
The following factors those shift the bond demand are following.
- 1- Wealth
- 2- Expected inflation
- 3- Expected return on stocks and other assets
- 4- Risk relative to alternatives
- 5- Liquidity of bonds relative to alternatives
Wealth:
An increase in wealth shifts the demand for bond to the right as wealthier peoples invest more. This will happen as the economy grows during an expansion. This will increase bond prices and lower yields.
Expected inflation: a fall in expected inflation shifts the bond demand curve to the right, increasing demand at each price and lowering the yield and increasing the bonds price.
