Exam 5: The Behavior of Interest Rates

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

The riskiness of an asset is measured by

-In the figure above,a factor that could cause the demand for bonds to decrease (shift to the left)is:

The ________ the returns on two securities move together,the ________ benefit there is from diversification.

-In the figure above,illustrates the effect of an increased rate of money supply growth at time period 0.From the figure,one can conclude that the

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

Of the four factors that influence asset demand,which factor will cause the demand for all assets to increase when it increases,everything else held constant?

If the expected return on bonds increases,all else equal,the demand for bonds increases,the price of bonds ________,and the interest rate ________.

Everything else held constant,if the expected return on U.S.Treasury bonds falls from 10 to 5 percent and the expected return on GE stock rises from 7 to 8 percent,then the expected return of holding GE stock ________ relative to U.S.Treasury bonds and the demand for GE stock ________.

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

When the interest rate changes,

Everything else held constant,if interest rates are expected to fall in the future,the demand for long-term bonds today ________ and the demand curve shifts to the ________.

-In the figure above,the price of bonds would fall from P1 to P2 when

In Keynes's liquidity preference framework,individuals are assumed to hold their wealth in two forms:

Holding the expected return on bonds constant,an increase in the expected return on common stocks would ________ the demand for bonds,shifting the demand curve to the ________.

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

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

When the expected inflation rate increases,the real cost of borrowing ________ and bond supply ________,everything else held constant.

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