Why interest rate on greek government bonds was increasing

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Reference no: EM131305436

In March 2010, Greece announced that it might have trouble in the future paying off the bonds it had sold to finance its government deficits. The Wall Street Journal reported, "Prevailing uncertainty over Greece's ability to fund itself . . . kept Greek government bonds under increasing pressure Thursday, pushing 10-year Greek yields above 7%."

a. Explain what the article means by "uncertainty over Greece's ability to fund itself."

b. What does it mean to say that Greek bonds were "under increasing pressure"?

c. Use a demand and supply graph for the bond market to illustrate why the interest rate on Greek government bonds was increasing. Be sure that your graph indicates any shifts in the demand and supply curves for Greek bonds.

Reference no: EM131305436

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