Question #240

Assume there is a situation where private bond markets are driving up yields on long-maturity public bonds. The central bank can always maintain whatever yields the government desires at every maturity. In this situation the central bank could hold yields constant but would be paying

• more for the bonds than the private markets were prepared to pay.
• less for the bonds than the private markets were prepared to pay.
• there is not enough information to answer. It depends on the maturity in question.

Answer #1651

Answer: more for the bonds than the private markets were prepared to pay.

Explanation

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