In 2012, Spain had what the Wall Street Journal described as a towering budget deficit. When the
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In 2012, Spain had what the Wall Street Journal described as a “towering budget deficit.” When the Spanish government had difficulty selling bonds to investors, the European Central Bank announced that it would begin buying these bonds. As a result, private investors increased their demand for Spanish bonds, and the interest rate on Spanish bonds fell from 5.75% to 3.87%.
Use a demand and supply graph for the bond market to illustrate why despite large government budget deficits, the interest rate on Spanish government bonds declined.
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Related Book For
Money Banking And The Financial System International Edition
ISBN: 978-1292000183
2nd Edition
Authors: R. Glenn Hubbard ,Anthony P Obrien
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