Question

Why would we see the prices on US government bonds suddenly rise? Multiple Choice Bond prices can only rise if the US government pays more interest on these investments They would rise if there was suddenly lots of bad economics news like higher unemployment an increase in natural disasters like explding volcanoes, or the start of new wars le China attacks Taiwan), then we would see bond prices rise on US government bonds If we had a sudden explosion of good economic news like lower unemployment a booming stock market that returned average rates of return of 15 percent or the signing of new peace treaties e Israel & Irani then we would see bonds prices rise on US government bonds

Answer 1

Question 1

US bonds are considered as the safest or risk less investment instruments.

The demand for such instruments generally increase when there is economic uncertainty and business cycle is in downturn or there is threat of conflict looming.

Given the supply of US bonds, an increase in demand for US bonds due to any of the above stated reason results in an increase in price of US bonds.

Thus,

The correct answer is the option (2) [They would rise if there was suddenly lots of bad economics news like high unemployment, an increase in natural disasters like exploding volcanoes, or the start of new wars (i.e. China attacks Taiwan), then we would see bond price rise on US government bonds].