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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!

Business   Economics   
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Answer #1

True.

To bring economy back to normalcy, Fed put a lot of money around $4 trillion in the economy since 2008. It means that spendings are more than government revenue and hence fiscal deficit has increased.

Treasury yields are the total amount of money you earn by owning U.S. Treasury bills, notes, or bonds. This yield move in the opposite direction of bond values.

It was expected that treasury yield rates will go up due to higher borrowings but the rates are low due to following reasons:

a. inflation is kept low.

b.there have been strong demand for Treasuries from abroad.

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