Question #82

In a fixed coupon government bond auction, the higher is the demand for the bonds

• the higher the yields will be at that asset maturity which suggests that higher budget deficits will eventually drive short-term interest rates down.
• the lower the yields will be at that asset maturity which suggests that higher budget deficits will eventually drive short-term interest rates down.
• the lower the yields will be at that asset maturity but this tells us nothing about the effect of budget deficits on short-term interest rates.

Answer #814

Answer: the lower the yields will be at that asset maturity but this tells us nothing about the effect of budget deficits on short-term interest rates.

Explanation

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