Exam 5: The Behaviour of Interest Rates

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

A decline in the expected inflation rate causes the demand for money to ________ and the demand curve to shift to the ________, everything else held constant.

-In the figure above, a factor that could cause the supply of bonds to shift to the right is ________.

If there is an excess supply of money ________.

The opportunity cost of holding money is ________.

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

When the interest rate on a bond is ________ the equilibrium interest rate, in the bond market there is excess ________ and the interest rate will ________.

If the price of gold becomes less volatile, then, other things equal, the demand for stocks will ________ and the demand for gold will ________.

Both the CAPM and APT suggest that an asset should be priced so that it has a higher expected return ________.

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 the price of a bond decreases, all else equal, the bond demand curve ________.

In Keynes's liquidity preference framework, ________.

Everything else held constant, when households save less, wealth and the demand for bonds ________ and the bond demand curve shifts ________.

Demonstrate graphically the effect of an increase in the personal savings rate. Show and explain the effect of increased savings on bond prices and interest rates. How would this change affect capital spending?

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

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

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

-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 ________.

-In the figure above, one factor not responsible for the decline in the demand for money is ________.