Exam 4: The Level of Interest Rates

Increased government budget deficits

The flow of funds approach to interest rate forecasting is associated with all but one of the following:

Deficit spending units (DSU) are represented in loanable funds theory as

With the real rate at 3 percent, most loans were made at 10 percent last year. This year interest rates have declined to 8 percent. What was the expected inflation rate last year?

If the real rate of interest is 4% and the expected inflation rate is 7%, a loan at 12%

An investor earned 12 percent last year, a year when actual inflation was 9 percent and was expected to have been 6 percent. The investor realized real rate of return was:

If current market rates on Treasury bonds are 6 percent and the real growth of the economy has and will be expected to grow at 3 percent. According to the Fisher effect, what is the expected rate of inflation?

All but one of the following is associated with economies with very high inflation rates?

The Fisher effect is a theory which holds that

In 2010 and 2011, Federal Reserve announced quantitative easing's, or QEs, which is to create money. This would lead to interest rates increase.

If yields on thirty-year U. S. Treasury bonds are 8% and the real rate of interest is estimated at 3%, the historical rate of inflation is 5%.

An investor received an 8 percent coupon rate last year on a $1000 bond purchased at par. The inflation rate during the year was 4 percent and is expected to be 5 percent next year. The realized real rate earned by the investor last year was:

Which of the following is more likely to adversely affect long-term bond prices?

Which statement is true about interest rate movements?

Economic models predict interest rates by estimating the statistical relationships between the and the resulting .

An increase in desired investment shifts the desired savings supply line upward to higher real rates of interest.

A change from an income tax to a value added tax on consumption

Interest rate forecasting using economic models assumes that financial markets are very efficient.

A decrease in the money stock by the Federal Reserve

The flow of funds forecasting method utilizes the concept of supply and demand of loanable funds.