Exam 5: The Behaviour of Interest Rates

Everything else held constant, a decrease in wealth ________.

Everything else held constant, when stock prices become less volatile, the demand curve for bonds shifts to the ________ and the interest rate ________.

A higher ________ means that an asset's return is more sensitive to changes in the value of the market portfolio.

Holding many risky assets and thus reducing the overall risk an investor faces is called ________.

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

Keynes assumed that money has ________ rate of return.

What is the impact on interest rates when the Bank of Canada decreases the money supply by selling bonds to the public?

Milton Friedman called the response of lower interest rates resulting from an increase in the money supply the ________ effect.

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

The price of gold should be ________ to the expected inflation rate.

If fluctuations in interest rates become smaller, then, other things equal, the demand for stocks ________ and the demand for long-term bonds ________.

The opportunity cost of holding money is ________.

An increase in the expected inflation rate will ________ the ________ for gold, ________ its price, everything else held constant.

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

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

A decrease in the brokerage commissions in the housing market from 6 percent to 5 percent of the sales price will shift the ________ curve for bonds to the ________, everything else held constant.

The demand for silver decreases, other things equal, when ________.

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