Exam 5: The Behavior of Interest Rates

In Keynes's liquidity preference framework,as the expected return on bonds increases (holding everything else unchanged),the expected return on money ________,causing the demand for ________ to fall.

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

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 ________.

When the prices of rare coins become volatile,the ________ curve for bonds shifts to the ________,everything else held constant.

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

An increase in the expected inflation rate causes the supply of bonds to ________ and the supply curve to shift to the ________,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 figure above,a factor that could cause the demand for bonds to shift to the right is

-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 rise in the price level causes the demand for money to ________ and the interest rate to ________,everything else held constant.

Everything else held constant,if the expected return on U.S.Treasury 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 U.S.Treasury bonds and the demand for corporate bonds ________.

Everything else held constant,if the expected return on ABC stock rises from 5 to 10 percent and the expected return on CBS stock is unchanged,then the expected return of holding CBS stock ________ relative to ABC stock and the demand for CBS stock ________.

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

In the Keynesian liquidity preference framework,an increase in the interest rate causes the demand curve for money to ________,everything else held constant.

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

In Keynes's liquidity preference framework

What is the impact on interest rates when the Federal Reserve decreases the money supply by selling bonds to the public?

When the Fed decreases the money stock,the money supply curve shifts to the ________ and the interest rate ________,everything else held constant.

When an economy grows out of a recession,normally the demand for bonds ________ and the supply of bonds ________,everything else held constant.

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