Fiscal Policy: Introduction to Bond Markets and Interest Rate Determination

One of the least understood topics among introductory Econ students is how bond markets work. This video lesson introduces the bond market, and explains how the demand for a government's debt is an important determination of the borrowing costs faced by that government. We will answer some important questions about bond markets, such as, "What's the relationship between bond prices and bond yields?" and "How could budget deficits and debt affect interest rates?"

In the next video we'll examine circumstances under which large budget deficits and national debt may NOT drive up a government's borrowing costs.

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