Question 1

In the market for loanable funds the price of the funds exchanged is

Accepted Answer

A)  the price of bonds. 
B)  the volume of bonds purchased. 
C)  the volume of bonds sold. 
D)  the interest rate. 
A)  the price of bonds. 
B)  the volume of bonds purchased. 
C)  the volume of bonds sold. 
D)  the interest rate.

Question 2

If there is an excess supply of bonds at a given price of bonds,then

Accepted Answer

A)  the interest rate will fall. 
B)  the interest rate will rise. 
C)  the price of bonds will fall. 
D)  the interest rate may rise or the interest rate may fall depending upon the reasons for the excess demand for bonds. 
A)  the interest rate will fall. 
B)  the interest rate will rise. 
C)  the price of bonds will fall. 
D)  the interest rate may rise or the interest rate may fall depending upon the reasons for the excess demand for bonds.

Question 3

What impact do savings rates in Belgium have on the real interest rate that businesses in Belgium must pay to obtain the funds to finance their spending on plant and equipment?

Accepted Answer

Because Belgium is a small open economy,

Question 4

In the bond market,the seller is considered to be

Accepted Answer

A)  the lender. 
B)  the borrower. 
C)  the lender or the borrower depending upon the use to which the funds are put. 
D)  the lender or the borrower depending upon whether interest rates are rising or falling. 
A)  the lender. 
B)  the borrower. 
C)  the lender or the borrower depending upon the use to which the funds are put. 
D)  the lender or the borrower depending upon whether interest rates are rising or falling.

Question 5

The world real interest rate is

Accepted Answer

A)  set annually by a special commission at the United Nations. 
B)  set annually by a special commission at the International Monetary Fund. 
C)  determined in the international capital market. 
D)  determined daily on the New York Stock Exchange. 
A)  set annually by a special commission at the United Nations. 
B)  set annually by a special commission at the International Monetary Fund. 
C)  determined in the international capital market. 
D)  determined daily on the New York Stock Exchange.

Question 6

What is a black swan event?

Accepted Answer

It refers to rare ev

Question 7

Studies by economists suggest that

Accepted Answer

A)  households do not increase their saving as the government's dissaving increases. 
B)  households increase their saving, but not by the full amount of an increase in government dissaving. 
C)  households also increase their dissaving when the government increases its dissaving. 
D)  households also increase their saving when the government increases its saving. 
A)  households do not increase their saving as the government's dissaving increases. 
B)  households increase their saving, but not by the full amount of an increase in government dissaving. 
C)  households also increase their dissaving when the government increases its dissaving. 
D)  households also increase their saving when the government increases its saving.

Question 8

Assess the impact on the bond market of the rise in Internet trading of stocks.

Accepted Answer

The liquidity of the stock market has be

Question 9

In an effort to increase government revenue,Congress and the president decide to increase the corporate profits tax.The likely result will be

Accepted Answer

A)  the supply curve for bonds shifts to the left. 
B)  the demand curve for bonds shifts to the left. 
C)  the equilibrium interest rate rises. 
D)  the equilibrium price of bonds falls. 
A)  the supply curve for bonds shifts to the left. 
B)  the demand curve for bonds shifts to the left. 
C)  the equilibrium interest rate rises. 
D)  the equilibrium price of bonds falls.

Question 10

Businesses typically issue bonds to finance

Accepted Answer

A)  their inventories. 
B)  payments to their workers. 
C)  spending on new plant and equipment. 
D)  dividend payments to their stockholders. 
A)  their inventories. 
B)  payments to their workers. 
C)  spending on new plant and equipment. 
D)  dividend payments to their stockholders.

Question 11

The average investor must weigh the benefits of liquidity against

Accepted Answer

A)  the high taxes generally levied on liquid assets. 
B)  the lower returns on liquid assets. 
C)  the high transactions costs involved in disposing of liquid assets. 
D)  the greater variability in the nominal returns on liquid assets. 
A)  the high taxes generally levied on liquid assets. 
B)  the lower returns on liquid assets. 
C)  the high transactions costs involved in disposing of liquid assets. 
D)  the greater variability in the nominal returns on liquid assets.

Question 12

Which of the following statements is correct?

Accepted Answer

A)  The supply curve for loanable funds slopes up, whereas the supply curve for bonds slopes down. 
B)  The demand curve for loanable funds slopes up, whereas the demand curve for bonds slopes down. 
C)  The demand curve for loanable funds and the demand curve for bonds both slope up. 
D)  The supply curve for bonds and the supply curve for loanable funds both slope up. 
A)  The supply curve for loanable funds slopes up, whereas the supply curve for bonds slopes down. 
B)  The demand curve for loanable funds slopes up, whereas the demand curve for bonds slopes down. 
C)  The demand curve for loanable funds and the demand curve for bonds both slope up. 
D)  The supply curve for bonds and the supply curve for loanable funds both slope up.

Question 13

The bond demand curve slopes down because

Accepted Answer

A)  interest rates decline as bond prices decline. 
B)  when bond prices are low, inflation is low. 
C)  the lender is willing and able to purchase more bonds when the price of the bond is low. 
D)  the borrower is willing and able to purchase more bonds when the price of the bond is low. 
A)  interest rates decline as bond prices decline. 
B)  when bond prices are low, inflation is low. 
C)  the lender is willing and able to purchase more bonds when the price of the bond is low. 
D)  the borrower is willing and able to purchase more bonds when the price of the bond is low.

Question 14

The bond supply curve

Accepted Answer

A)  shows the quantity of bonds lenders are willing to supply as bond prices change. 
B)  shows the quantity of bonds lenders are willing to supply as interest rates change. 
C)  shows the quantity of bonds borrowers are willing to supply as bond prices change. 
D)  is represented by a downward-sloping line when the price of bonds is on the vertical axis and the quantity of bonds supplied is on the vertical axis. 
A)  shows the quantity of bonds lenders are willing to supply as bond prices change. 
B)  shows the quantity of bonds lenders are willing to supply as interest rates change. 
C)  shows the quantity of bonds borrowers are willing to supply as bond prices change. 
D)  is represented by a downward-sloping line when the price of bonds is on the vertical axis and the quantity of bonds supplied is on the vertical axis.

Question 15

During most of the time in recent decades,the government sector

Accepted Answer

A)  has not spent more than it collected in taxes. 
B)  has run large deficits. 
C)  has run large surpluses. 
D)  has balanced its budget every year. 
A)  has not spent more than it collected in taxes. 
B)  has run large deficits. 
C)  has run large surpluses. 
D)  has balanced its budget every year.

Question 16

Suppose Ireland is a small open economy that is neither a net international borrower or international lender.Many countries increase their savings resulting in a lower world real interest rate.Make use of a graph of the loanable funds market for a small open economy to show the impact this has on Ireland's international financial position.

Accepted Answer

An increase in global savings

Question 17

Suppose you are risk averse and you are deciding between two investments.One has a guaranteed return of 5% while the second has a 50% chance of a 10% return and a 50% change of a 0% return.Which investment would you choose? Why?

Accepted Answer

The second investment has an e

Question 18

An increase in the corporate profits tax is likely to cause

Accepted Answer

A)  the equilibrium interest rate to rise and the equilibrium price of bonds to fall. 
B)  the equilibrium interest rate to fall and the equilibrium price of bonds to rise. 
C)  the equilibrium interest rate and the equilibrium price of bonds both rise. 
D)  the equilibrium interest rate and the equilibrium price of bonds both fall. 
A)  the equilibrium interest rate to rise and the equilibrium price of bonds to fall. 
B)  the equilibrium interest rate to fall and the equilibrium price of bonds to rise. 
C)  the equilibrium interest rate and the equilibrium price of bonds both rise. 
D)  the equilibrium interest rate and the equilibrium price of bonds both fall.

Question 19

The supply curve for bonds would be shifted to the left by

Accepted Answer

A)  a decrease in government borrowing. 
B)  a decrease in the corporate tax on profits. 
C)  an increase in tax subsidies for investment. 
D)  an increase in expected inflation. 
A)  a decrease in government borrowing. 
B)  a decrease in the corporate tax on profits. 
C)  an increase in tax subsidies for investment. 
D)  an increase in expected inflation.

Question 20

How can diversification reduce idiosyncratic risk but not systematic risk?

Accepted Answer

Since the returns on most assets do not

In the market for loanable funds the price of the funds exchanged is

If there is an excess supply of bonds at a given price of bonds,then

What impact do savings rates in Belgium have on the real interest rate that businesses in Belgium must pay to obtain the funds to finance their spending on plant and equipment?

In the bond market,the seller is considered to be

The world real interest rate is

What is a black swan event?

Studies by economists suggest that

Assess the impact on the bond market of the rise in Internet trading of stocks.

In an effort to increase government revenue,Congress and the president decide to increase the corporate profits tax.The likely result will be

Businesses typically issue bonds to finance

The average investor must weigh the benefits of liquidity against

Which of the following statements is correct?

The bond demand curve slopes down because

The bond supply curve

During most of the time in recent decades,the government sector

Suppose you are risk averse and you are deciding between two investments.One has a guaranteed return of 5% while the second has a 50% chance of a 10% return and a 50% change of a 0% return.Which investment would you choose? Why?

An increase in the corporate profits tax is likely to cause

The supply curve for bonds would be shifted to the left by

How can diversification reduce idiosyncratic risk but not systematic risk?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 4: Determining Interest Rates

In the market for loanable funds the price of the funds exchanged is

If there is an excess supply of bonds at a given price of bonds,then

What impact do savings rates in Belgium have on the real interest rate that businesses in Belgium must pay to obtain the funds to finance their spending on plant and equipment?

In the bond market,the seller is considered to be

The world real interest rate is

What is a black swan event?

Studies by economists suggest that

Assess the impact on the bond market of the rise in Internet trading of stocks.

In an effort to increase government revenue,Congress and the president decide to increase the corporate profits tax.The likely result will be

Businesses typically issue bonds to finance

The average investor must weigh the benefits of liquidity against

Which of the following statements is correct?

The bond demand curve slopes down because

The bond supply curve

During most of the time in recent decades,the government sector

Suppose you are risk averse and you are deciding between two investments.One has a guaranteed return of 5% while the second has a 50% chance of a 10% return and a 50% change of a 0% return.Which investment would you choose? Why?

An increase in the corporate profits tax is likely to cause

The supply curve for bonds would be shifted to the left by

How can diversification reduce idiosyncratic risk but not systematic risk?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters