Economics 315 First Third Exam
Feel free to bring in graphs or data into your analysis. Your essay should be detailed enough to provide analysis for all three periods (a paragraph is not sufficient to answer this question). Please limit your answers to no more than 2 typewritten double spaced pages (not including graphs or tables).
From the end of 2009 to the end of 2019, the size of the United States National Debt held by the public grew from $6.8 trillion to $17.2 trillion, which meant that the supply of government bonds rose substantially over the period. During the same period, however, the 10 year US Treasury Bond yield to maturity fell from 3.59% in December 2009 to 1.86% in December of 2019. Explain how such an increase in the supply of government bonds can lead to a fall in the interest rate. Second, consider that the 10 year bond rate has fallen further in 2020 to a low of 0.52 percent on August 4, 2020, despite a further increase in the national debt ($20.5 trillion as of June 30, 2020). Why has this continued in 2020 during an economic crisis? Third, Since August 4, 2020, the yield has risen to 1.52 percent as of Thursday, September 30,2021, and the national debt held by the public has increased (to $22.35 trillion dollars as of June 30, 2021). Why has the 10 year bond yield been rising since August?
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