Exam 5: The Behavior of Interest Rates

In contrast to the CAPM, the APT assumes that there can be several sources of ________ that cannot be eliminated through diversification.

A movement along the bond demand or supply curve occurs when ________ changes.

When the interest rate changes,

When the price of a bond is ________ the equilibrium price, there is an excess demand for bonds and price will ________.

The demand for houses decreases, all else equal, when

The economist Irving Fisher, after whom the Fisher effect is named, explained why interest rates ________ as the expected rate of inflation ________, everything else held constant.

When the economy slips into a recession, normally the demand for bonds ________, the supply of bonds ________, and the interest rate ________, everything else held constant.

-In the figure above, the decrease in the interest rate from i₁ to i₂ can be explained by

In the bond market, the market equilibrium shows the market-clearing ________ and market-clearing ________.

Everything else held constant, a decrease in wealth

Of the four effects on interest rates from an increase in the money supply, the one that works in the opposite direction of the other three is the

When the price of a bond is above the equilibrium price, there is an excess ________ bonds and price will ________.

When the expected inflation rate increases, the demand for bonds ________, the supply of bonds ________, and the interest rate ________, everything else held constant.

An increase in an asset's expected return relative to that of an alternative asset, holding everything else constant, ________ the quantity demanded of the asset.

When the government has a surplus, as occurred in the late 1990s, the ________ curve of bonds shifts to the ________, everything else held constant.

In the Keynesian liquidity preference framework, a rise in the price level causes the demand for money to ________ and the demand curve to shift to the ________, everything else held constant.

________ in the money supply creates excess demand for ________, causing interest rates to ________, everything else held constant.

When the price of a bond decreases, all else equal, the bond demand curve

In a business cycle expansion, the ________ of bonds increases and the ________ curve shifts to the ________ as business investments are expected to be more profitable.

In Keynes's liquidity preference framework,