Exam 5: The Behavior of Interest Rates

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 ________.

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

The reduction of brokerage commissions for trading common stocks that occurred in 1975 caused the demand for bonds to ________ and the demand curve to shift to the ________.

It is possible that when the money supply rises,interest rates may ________ if the ________ effect is more than offset by changes in income,the price level,and expected inflation.

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,an increase in the liquidity of bonds results in a ________ in demand for bonds and the demand curve shifts to the ________.

If there is an excess supply of money

In Keynes's liquidity preference framework

An increase in the interest rate

If there is an excess demand for money,individuals ________ bonds,causing interest rates to ________.

Using the liquidity preference framework,show what happens to interest rates during a business cycle recession.

In the liquidity preference framework,a one-time increase in the money supply results in a price level effect.The maximum impact of the price level effect on interest rates occurs

Everything else held constant,if the expected return on RST stock declines from 12 to 9 percent and the expected return on XYZ stock declines from 8 to 7 percent,then the expected return of holding RST stock ________ relative to XYZ stock and demand for XYZ stock ________.

-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

The demand for Picasso paintings rises (holding everything else equal)when

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

You would be more willing to buy AT&T bonds (holding everything else constant)if

The supply curve for bonds has the usual upward slope,indicating that as the price ________,ceteris paribus,the ________ increases.

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

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