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True or False: The financial crisis of 2008 has resulted in a spike in the US...

True or False:

The financial crisis of 2008 has resulted in a spike in the US government's budget deficit.

Despite this fact the treasury yield rates have consistently stayed low.

Explain your answer.

※Many thanks in advance!

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Answer #1

True. Expansionary fiscal policy involves more govt.spending with reduced taxes. Treasury yield is the return offered on investment expressed as a percentage, on the U.S. government's debt liabilities.

It should happen that when govt. spending money in an economy then as demand for money goes up then interest rates should go up and hence treasury yield should also go up.

It did not happen due to sustained demand for dollars.Many economies like China which had/have huge dollar reserves kept on investing in US due to its credit ratings made sure that money supply was steady and hence treasury yield did not go up.

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