Question 1

A decrease in the money supply leads to an initial increase but a long-run decrease in the equilibrium interest rate if the _____ effect dominates other effects.

Accepted Answer

A)   liquidity
B)   price level
C)   expected inflation
D)   none of the aboveE) All of the above
F) None of the above

Question 2

When inflation expectations rise, what happens to the demand, and how does the demand curve shift?

Accepted Answer

The demand goes down...

Question 3

Corporations issue more bonds when

Accepted Answer

A)   their stocks are publicly traded.
B)   the government runs a deficit.
C)   they perceive opportunities for profitable expansion.
D)   all of the above.E) None of the above
F) B) and C)

Question 4

Which of the following affects the supply and demand for bonds?

Accepted Answer

A)   liquidity
B)   real return
C)   government budget deficits
D)   none of the aboveE) All of the above
F) B) and D)

Question 5

What are the reasons for the general fall in interest rates between 1920 and World War II?

Accepted Answer

A)   poor business conditions and low confidence in public policies
B)   high taxes and stringent government regulations
C)   an increase in the demand for bonds
D)   an increase in the supply of bondsE) All of the above
F) A) and B)

Question 6

If the interest rate falls, people will want to hold more bonds, meaning the demand for money shifts to the left.

Accepted Answer

A) True 
 B)False

Question 7

Stocks are perceived to be riskier. Explain how bond yields would be affected.

Accepted Answer

The relative risk of bonds wou...

Question 8

Use a graph of the interest rate against time to explain the effect of a decrease in the money supply when the liquidity effect is weaker the other effects.

Accepted Answer

The liquidity effect causes an initial i...

Question 9

Which of the following affect(s)  the demand for bonds?

Accepted Answer

A)   real rate of return
B)   household wealth
C)   liquidity
D)   all of the aboveE) C) and D)
F) None of the above

Question 10

Inflation affects the equilibrium yield on bonds due to its impact on

Accepted Answer

A)   the demand for bonds.
B)   the supply of bonds.
C)   the supply and demand for bonds.
D)   none of the aboveE) None of the above
F) A) and C)

Question 11

The supply of bonds shifts to the right with an increase in expected inflation, since inflation reduces burden of borrowing.

Accepted Answer

A) True 
 B)False

Question 12

If the interest rate rises, people will want to hold fewer bonds, meaning the demand for money shifts to the right.

Accepted Answer

A) True 
 B)False

Question 13

An economic expansion can lead to higher equilibrium bond yields.

Accepted Answer

A) True 
 B)False

Exam 5: The Economics of Interest-Rate Fluctuations

Which of the following affects the supply and demand for bonds?

Correct Answer
verified

A decrease in the money supply leads to an initial increase but a long-run decrease in the equilibrium interest rate if the _____ effect dominates other effects.

Correct Answer
verified

Stocks are perceived to be riskier. Explain how bond yields would be affected.

Correct Answer
verified
The relative risk of bonds wou...
View Answer

Use a graph of the interest rate against time to explain the effect of a decrease in the money supply when the liquidity effect is weaker the other effects.

Correct Answer
verified
The liquidity effect causes an initial i...
View Answer

What are the reasons for the general fall in interest rates between 1920 and World War II?

Correct Answer
verified

The supply of bonds shifts to the right with an increase in expected inflation, since inflation reduces burden of borrowing.

Correct Answer
verified

Inflation affects the equilibrium yield on bonds due to its impact on

Correct Answer
verified

If the interest rate rises, people will want to hold fewer bonds, meaning the demand for money shifts to the right.

Correct Answer
verified

Corporations issue more bonds when

Correct Answer
verified

If the interest rate falls, people will want to hold more bonds, meaning the demand for money shifts to the left.

Correct Answer
verified

When inflation expectations rise, what happens to the demand, and how does the demand curve shift?

Correct Answer
verified
The demand goes down...
View Answer

Which of the following affect(s) the demand for bonds?

Correct Answer
verified

An economic expansion can lead to higher equilibrium bond yields.

Correct Answer
verified

Exam 5: The Economics of Interest-Rate Fluctuations

Which of the following affects the supply and demand for bonds?

Correct AnswerverifiedShow Answer

A decrease in the money supply leads to an initial increase but a long-run decrease in the equilibrium interest rate if the _____ effect dominates other effects.

Correct AnswerverifiedShow Answer

Stocks are perceived to be riskier. Explain how bond yields would be affected.

Correct AnswerverifiedThe relative risk of bonds wou...View AnswerShow Answer

Use a graph of the interest rate against time to explain the effect of a decrease in the money supply when the liquidity effect is weaker the other effects.

Correct AnswerverifiedThe liquidity effect causes an initial i...View AnswerShow Answer

What are the reasons for the general fall in interest rates between 1920 and World War II?

Correct AnswerverifiedShow Answer

The supply of bonds shifts to the right with an increase in expected inflation, since inflation reduces burden of borrowing.

Correct AnswerverifiedShow Answer

Inflation affects the equilibrium yield on bonds due to its impact on

Correct AnswerverifiedShow Answer

If the interest rate rises, people will want to hold fewer bonds, meaning the demand for money shifts to the right.

Correct AnswerverifiedShow Answer

Corporations issue more bonds when

Correct AnswerverifiedShow Answer

If the interest rate falls, people will want to hold more bonds, meaning the demand for money shifts to the left.

Correct AnswerverifiedShow Answer

When inflation expectations rise, what happens to the demand, and how does the demand curve shift?

Correct AnswerverifiedThe demand goes down...View AnswerShow Answer

Which of the following affect(s) the demand for bonds?

Correct AnswerverifiedShow Answer

An economic expansion can lead to higher equilibrium bond yields.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The relative risk of bonds wou...
View Answer

Correct Answer
verified
The liquidity effect causes an initial i...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The demand goes down...
View Answer

Correct Answer
verified

Correct Answer
verified