Use a Graph for the Supply and Demand for Bonds

question 35

Essay

Use a graph for the supply and demand for bonds to explain the effect of an increase in the government budget deficit on the equilibrium yield.

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Definitions:

Operating Expense

Costs associated with the day-to-day operations of a business, such as rent, utilities, and payroll, excluding cost of goods sold.

Purchases Discounts

An allowance given by the seller to the buyer for early payment or for buying in large quantities.

Net Purchases

The total cost of goods bought for resale, after subtracting returns, allowances, and discounts.