Select the circumstance in which the impact on government bond yields of a new source of revenue

Question:

Select the circumstance in which the impact on government bond yields of a new source of revenue (such as a natural resource discovery) would be largest.

Explain your choice.

a. Before the discovery, the government was heavily indebted with a crippling debt-service burden or

b. Before the discovery, the government had a very low debt burden.

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