Exam 5: The Behaviour of Interest Rates

The demand curve for bonds has the usual downward slope, indicating that at ________ prices of the bond, everything else equal, the ________ is higher.

-In the figure above, one factor not responsible for the decline in the demand for money is ________.

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

Discovery of new gold in Alaska will ________ the ________ of gold, ________ its price, everything else held constant.

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

Using the liquidity preference framework, what will happen to interest rates if the Bank of Canada increases the money supply?

-In the figure above, a factor that could cause the demand for bonds to shift to the right is ________.

Demonstrate graphically and explain how increased profitability of investments and increased deficits affect bond prices and interest rates.

Everything else held constant, if the expected return on government bonds falls from 8 to 7 percent and the expected return on corporate bonds falls from 10 to 8 percent, then the expected return of corporate bonds ________ relative to government bonds and the demand for corporate bonds ________.

The bond supply and demand framework is easier to use when analyzing the effects of changes in ________, while the liquidity preference framework provides a simpler analysis of the effects from changes in income, the price level, and the supply of ________.

Everything else held constant, an increase in the riskiness of bonds relative to alternative assets causes the demand for bonds to ________ and the demand curve to shift to the ________.

The supply curve for bonds has the usual upward slope, indicating that as the price ________, ceteris paribus, the ________ increases.

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 figure above, a factor that could cause the demand for bonds to decrease (shift to the left) is ________.

The riskiness of an asset that is unique to the particular asset is ________.

In the 1990s Japan had the lowest interest rates in the world due to a combination of ________.

When stock prices become more volatile, the ________ curve for gold shifts right and gold prices ________, everything else held constant.

In Keynes's liquidity preference framework, ________.

A business cycle expansion increases income, causing money demand to ________ and interest rates to ________, everything else held constant.

During a recession, the supply of bonds ________ and the supply curve shifts to the ________, everything else held constant.