True or False: Business conditions affect both supply and demand of bonds.

The assertion that business conditions affect both supply and demand of bonds is accurate. When economic conditions fluctuate, they have a direct impact on the behavior of investors and issuers in the bond market.

In times of strong economic growth, businesses may be more inclined to issue bonds to finance expansion projects, indicating an increase in the supply of bonds available in the market. Conversely, in a recession or period of economic uncertainty, there may be a reduction in bond issuance as companies might delay projects or face lower revenues, resulting in decreased supply.

On the demand side, when business conditions are strong and investors feel confident about the economy, they might prefer higher-risk investments such as stocks, potentially reducing demand for safer investments like bonds. However, if economic conditions worsen or there is market volatility, investors often seek the stability that bonds provide, increasing demand for them.

Therefore, understanding the interplay between business conditions, supply, and demand in the bond market highlights the dynamic nature of financial instruments and the broader economy's influence on them.