How to Answer: What would be the effect of tightening monetary policy on the value of bonds in the bond market?
Advice and answer examples written specifically for an Economist job interview.
23. What would be the effect of tightening monetary policy on the value of bonds in the bond market?
How to Answer
Display to the hiring manager that you are familiar with the basic concepts of economics. Your answer can be to the point, however; your opinion should be supported.
Written by Rachelle Enns
Answer Example
"I have completed significant research on this topic and have found that with interest rates at low levels, bond yields trend lower, and their inverse relationship with bond prices means that most fixed-income instruments post sizeable price gains. For example, according to an article I recently read on Investopedia.com; If policy is accommodative for too long, inflation concerns may send bonds sharply lower as yields adjust to higher inflationary expectations. Cash is not king during periods of accommodative policy, as investors prefer to deploy their money anywhere rather than parking it in deposits that provide minimal returns."
Written by Rachelle Enns