Exam 5: The Behaviour of Interest Rates

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

The risk of a well-diversified portfolio depends only on the ________ risk of the assets in the portfolio.

-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 liquidity preference framework, demonstrate graphically the effect of a decrease in the money supply. Indicate on the graph the excess demand or excess supply of money. Explain the process of adjustment that results in a change in the equilibrium interest rate, and the direction of the change in rates.

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

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

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

If brokerage commissions on bond sales decrease, then, other things equal, the demand for bonds will ________ and the demand for real estate will ________.

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

Using the liquidity preference framework, what will happen to interest rates if the Bank of Canada increases the money supply?

A decrease in the brokerage commissions in the housing market from 6 percent to 5 percent of the sales price will shift the ________ curve for bonds to the ________, everything else held constant.

-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 ________.

The demand for silver decreases, other things equal, when ________.

Holding all other factors constant, the quantity demanded of an asset is ________.

In Keynes's liquidity preference framework, if there is excess demand for money, there is ________.

Everything else held constant, an increase in the riskiness of bonds relative to alternative assets causes the demand for bonds to ________ and the demand curve to shift to the ________.

Everything else held constant, would an increase in volatility of stock prices have any impact on the demand for rare coins? Why or why not?

When the interest rate is above the equilibrium interest rate, there is an excess ________ money and the interest rate will ________.

If housing prices are expected to increase, then, other things equal, the demand for houses will ________ and that of Treasury bills will ________.

The demand curve for bonds has the usual downward slope, indicating that at ________ prices of the bond, everything else equal, the ________ is higher.