Exam 5: The Behavior of Interest Rates

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

A higher ________ means that an asset's return is more sensitive to changes in the value of the market portfolio.

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

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

Use the following figure to answer the questions : -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

Factors that decrease the demand for bonds include

Deflation causes the demand for bonds to ________,the supply of bonds to ________,and bond prices to ________,everything else held constant.

The price of gold should be ________ to the expected inflation rate.

An increase in an asset's expected return relative to that of an alternative asset,holding everything else constant,________ the quantity demanded of the asset.

In the market for money,an interest rate below equilibrium results in an excess ________ money and the interest rate will ________.

If the liquidity effect is smaller than the other effects,and the adjustment to expected inflation is slow,then the

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 ________.

In his Liquidity Preference Framework,Keynes assumed that money has a zero rate of return; thus,

When the interest rate changes,

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

Use the following figure to answer the questions : -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

Use the following figure to answer the questions : -In the figure above,the decrease in the interest rate from i₁ to i₂ can be explained by

The interest rate falls when either the demand for bonds ________ or the supply of bonds ________.

In the 1990s Japan had the lowest interest rates in the world due to a combination of