Exam 5: The Behavior of Interest Rates

The demand for silver decreases,other things equal,when

Everything else held constant,an increase in expected inflation,lowers the expected return on ________ compared to ________ assets.

Holding the expected return on bonds constant,an increase in the expected return on common stocks would ________ the demand for bonds,shifting the demand curve to the ________.

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 ________.

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

An increase in the expected inflation rate will ________ the ________ for gold,________ its price,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 ________.

If prices in the bond market become more volatile,everything else held constant,the demand curve for bonds shifts ________ and interest rates ________.

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.

If wealth increases,the demand for stocks ________ and that of long-term bonds ________,everything else held constant.

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

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

If fluctuations in interest rates become smaller,then,other things equal,the demand for stocks ________ and the demand for long-term bonds ________.

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

When the growth rate of the money supply increases,interest rates end up being permanently lower if

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

In a business cycle expansion,the ________ of bonds increases and the ________ curve shifts to the ________ as business investments are expected to be more profitable.

Pieces of property that serve as a store of value are called

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