Exam 5: The Behavior of Interest Rates

The demand for silver decreases,other things equal,when

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

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

You would be less willing to purchase U.S.Treasury bonds,other things equal,if

A lower level of income causes the demand for money to ________ and the interest rate to ________,everything else held constant.

Factors that can cause the supply curve for bonds to shift to the right include

Everything else held constant,during a business cycle expansion,the supply of bonds shifts to the ________ as businesses perceive more profitable investment opportunities,while the demand for bonds shifts to the ________ as a result of the increase in wealth generated by the economic expansion.

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

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

In the loanable funds framework,the ________ is measured on the vertical axis.

When gold prices become more volatile,the ________ curve for gold shifts to the ________;________ the price of gold.

In the Keynesian liquidity preference framework,a rise in the price level causes the demand for money to ________ and the demand curve to shift to the ________,everything else held constant.

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 ________.

Keynes assumed that money has ________ rate of return.

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

When the interest rate changes,

When the expected inflation rate increases,the demand for bonds ________,the supply of bonds ________,and the interest rate ________,everything else held constant.

Everything else held constant,when bonds become less widely traded,and as a consequence the market becomes less liquid,the demand curve for bonds shifts to the ________ and the interest rate ________.

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

The demand for gold increases,other things equal,when