Question

Which factor does not shift the demand for bonds Question 3 options: Expected inflation Liquidity Expected return Government deficit

Answer 1

Answer:

Government deficit

Explanation:

Bonds are financial instruments, and financial instruments are affected by various factors, for their demand and supply.

If there is a government deficit and bonds are completely private and not treasury bonds then there would be no effect on the demand  of bonds.

Expected inflation causes the interest rate on bonds to increase, accordingly the demand for bonds increase.

Liquidity of a financial instrument affects a lot.

Highly liquid bonds are highly demanded and vice-e-versa.

Expected return affects the demand, if return expectations are high then demands are also high, if expected return is low, then demands are also low.