Exam 5: The Behaviour of Interest Rates

In the loanable funds framework, the demand curve of loanable funds is ________.

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.

Pieces of property that serve as a store of value are called ________.

-The figure above illustrates the effect of an increased rate of money supply growth at time period T₀. From the figure, one can conclude that the ________.

When the inflation rate is expected to increase, the ________ for bonds falls, while the ________ curve shifts to the right, everything else held constant.

In the market for money, an interest rate below equilibrium results in an excess ________ money and the interest rate will ________.

Interest rates increased continuously during the 1970s. The most likely explanation is ________.

If housing prices are expected to increase, then, other things equal, the demand for houses will ________ and that of Treasury bills will ________.

-The figure above illustrates the effect of an increased rate of money supply growth at time period T₀. From the figure, one can conclude that the ________.

A return to the gold standard, that is, using gold for money will ________ the ________ for gold, ________ its price, everything else held constant.

Everything else held constant, when households save less, wealth and the demand for bonds ________ and the bond demand curve shifts ________.

In the loanable funds framework, the ________ curve of bonds is equivalent to the ________ curve of loanable funds.

During business cycle expansions when income and wealth are rising, the demand for bonds ________ and the demand curve shifts to the ________, everything else held constant.

Holding all other factors constant, the quantity demanded of an asset is ________.

If gold becomes acceptable as a medium of exchange, the demand for gold will ________ and the demand for bonds will ________, everything else held constant.

The riskiness of an asset is measured by ________.

An increase in the expected rate of inflation will ________ the expected return on bonds relative to the that on ________ assets, everything else held constant.

-In the figure above, a factor that could cause the supply of bonds to increase (shift to the right) is ________.

Both the CAPM and APT suggest that an asset should be priced so that it has a higher expected return ________.

-In the figure above, the factor responsible for the decline in the interest rate is ________.