Macroeconomics 5th Edition by Olivier Blanchard

Exercise 10

Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly.
a. Junk bonds are bonds nobody wants to hold.
b. The price of a one-year bond decreases when the nominal one-year interest rate increases.
c. Given the Fisher hypothesis, an upward-sloping yield curve may indicate that financial markets are worried about inflation in the future.
d. Long-term interest rates typically move more than shortterm interest rates.
e. An equal increase in expected inflation and nominal interest rates at all maturities should have no effect on the stock market.
f. A monetary expansion will lead to an upward-sloping yield curve.
g. A rational investor should never pay a positive price for a stock that will never pay dividends.
h. The strong performance of the U.S. stock market in the 1990s reflects the strong performance of the U.S. economy during that period.