econ206 chapter 5

In the figure above, a factor that could cause the supply of bonds to increase (shift to the right) is ________. A) a decrease in government budget deficits B) a decrease in expected inflation C) expectations of more profitable investment opportunities D) a business cycle recession

C

A rise in the price level causes the demand for money to ________ and the interest rate to ________, everything else held constant. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase

D

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 ________. A) rise; right B) rise; left C) fall; right D) fall; left

D

When the price of a bond is _______ the equilibrium price, there is an excess demand for bonds and price will ________. A) above; rise B) above; fall C) below; fall D) below; rise

D

Everything else held constant, a decrease in wealth ________. A) increases the demand for stocks B) increases the demand for bonds C) reduces the demand for silver D) increases the demand for gold

C

Everything else held constant, if the expected return on RST stock declines from 12 to 9 percent and the expected return on XYZ stock declines from 8 to 7 percent, then the expected return of holding RST stock ________ relative to XYZ stock and demand for XYZ stock ________. A) rises; rises B) rises; falls C) falls; rises D) falls; falls

C

Of the four effects on interest rates from an increase in the money supply, the one that works in the opposite direction of the other three is the ________. A) liquidity effect B) income effect C) price level effect D) expected inflation effect

A

When the price of a bond decreases, all else equal, the bond demand curve ________. A) shifts right B) shifts left C) does not shift D) inverts

C

In a business cycle expansion, the ________ of bonds increases and the ________ curve shifts to the ________ as business investments are expected to be more profitable. A) supply; supply; right B) supply; supply; left C) demand; demand; right D) demand; demand; left

A

Everything else held constant, during a business cycle expansion, the supply of bonds shifts to the ____ ___ as businesses perceive more profitable investment opportunities, while the demand for bonds shifts to the _____ as a result of the increase in wealth generated by the economic expansion. A) right; left B) right; right C) left; left D) left; right

B

If housing prices are expected to increase, then, other things equal, the demand for houses will _______ and that of Treasury bills will ________. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase

B

In Keynes's liquidity preference framework, as the expected return on bonds increases (holding everything else unchanged), the expected return on money _______, causing the demand for ________ to fall. A) falls; bonds B) falls; money C) rises; bonds D) rises; money

B

In the Keynesian liquidity preference framework, a rise in the price level causes the demand for money to ________ and the demand curve to shift to the ________, everything else held constant. A) increase; left B) increase; right C) decrease; left D) decrease; right

B

In the figure above, a factor that could cause the demand for bonds to decrease (shift to the left) is ________. A) an increase in the expected return on bonds relative to other assets B) a decrease in the expected return on bonds relative to other assets C) an increase in wealth D) a reduction in the riskiness of bonds relative to other assets

B

In the figure above, the decrease in the interest rate from i1 to i2 can be explained by ________. A) a decrease in money growth B) a decline in the expected price level C) an increase in income D) an increase in the expected price level

B

In the figure above, the decrease in the interest rate from i1 to i2 can be explained by ________. A) a decrease in money growth B) an increase in money growth C) a decline in the expected price level D) an increase in income

B

In the figure above, the price of bonds would fall from P2 to P1 if ________. A) there is a business cycle recession B) there is a business cycle expansion demand up supply up C) inflation is expected to increase in the future D) inflation is expected to decrease in the future

B

The bond supply and demand framework is easier to use when analyzing the effects of changes in ____ ____, while the liquidity preference framework provides a simpler analysis of the effects from changes in income, the price level, and the supply of __ _____. A) expected inflation; bonds B) expected inflation; money C) government budget deficits; bonds D) government budget deficits; money

B

The demand for gold increases, other things equal, when ________. A) the market for silver becomes more liquid B) interest rates are expected to rise C) interest rates are expected to fall D) real estate prices are expected to increase

B

When real income _______, the demand curve for money shifts to the ________ and the interest rate _______, everything else held constant. A) falls; right; rises B) rises; right; rises C) falls; left; rises D) rises; left; rises

B

When the economy slips into a recession, normally the demand for bonds __ ____, the supply of bonds __ ___, and the interest rate ____falls____, everything else held constant. A) increases; increases; rises B) decreases; decreases; falls C) increases; decreases; falls D) decreases; increases; rises

B

When the government has a surplus, as occurred in the late 1990s, the ______ curve of bonds shifts to the ___ ____, everything else held constant. A) supply; right B) supply; left C) demand; right D) demand; left

B

When the inflation rate is expected to increase, the ___ _____ for bonds falls, while the ______ curve shifts to the right, everything else held constant. A) demand; demand B) demand; supply C) supply; demand D) supply; supply

B

When the interest rate on a bond is ________ the equilibrium interest rate, in the bond market there is excess _______ and the interest rate will ________. A) above; demand; rise B) above; demand; fall C) below; supply; fall D) above; supply; rise

B

When the interest rate on a bond is above the equilibrium interest rate, in the bond market there is excess ________ and the interest rate will _______. A) demand; rise B) demand; fall C) supply; fall D) supply; rise

B

During a recession, the supply of bonds __ ______ and the supply curve shifts to the ___ ____, everything else held constant. A) increases; left B) increases; right C) decreases; left D) decreases; right

C

During business cycle expansions when income and wealth are rising, the demand for bonds _______ and the demand curve shifts to the _______, everything else held constant. A) falls; right B) falls; left C) rises; right D) rises; left

C

If there is an excess supply of money ________. A) individuals sell bonds, causing the interest rate to rise B) individuals sell bonds, causing the interest rate to fall C) individuals buy bonds, causing interest rates to fall D) individuals buy bonds, causing interest rates to rise

C

In Keynes's liquidity preference framework, if there is excess demand for money, there is ________. A) excess demand for bonds B) equilibrium in the bond market C) excess supply of bonds D) too much money

C

In Keynes's liquidity preference framework, individuals are assumed to hold their wealth in two forms: __ ______. A) real assets and financial assets B) stocks and bonds C) money and bonds Total wealth equals total amount of money and bonds D) money and gold

C

In the Keynesian liquidity preference framework, an increase in the interest rate causes the demand curve for money to ________, everything else held constant. A) shift right B) shift left C) stay where it is D) invert

C

In the bond market, the market equilibrium shows the market-clearing ________ and market-clearing _______. A) price; deposit B) interest rate; deposit C) price; interest rate D) interest rate; premium

C

In the figure above, a factor that could cause the demand for bonds to shift to the right is ________. A) an increase in the riskiness of bonds relative to other assets B) an increase in the expected rate of inflation C) expectations of lower interest rates in the future D) a decrease in wealth

C

In the figure above, one factor not responsible for the decline in the demand for money is ________. A) a decline the price level B) a decline in income C) an increase in income demand increase D) a decline in the expected inflation rate

C

In the figure above, the factor responsible for the decline in the interest rate is ________. A) a decline the price level B) a decline in income C) an increase in the money supply D) a decline in the expected inflation rate

C

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 ________. A) liquidity effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation B) liquidity effect is larger than the expected inflation effect and interest rates adjust quickly to changes in expected inflation C) liquidity effect is larger than the expected inflation effect 最终and interest rates adjust slowly to changes in expected inflation D) liquidity effect is smaller than the expected inflation effect and interest rates adjust slowly to changes in expected inflation

C

The opportunity cost of holding money is ________. A) the level of income B) the price level C) the interest rate D) the discount rate

C

When the interest rate is above the equilibrium interest rate, there is an excess ____ of money and the interest rate will ______. A) demand for; rise B) demand for; fall C) supply of; fall D) supply of; rise

C

When the price of a bond is above the equilibrium price, there is an excess ________ bonds and price will _______. A) demand for; rise B) demand for; fall C) supply of; fall D) supply of; rise

C

You would be less willing to purchase bonds, other things equal, if ________. A) you inherit $1 million from your Uncle Harry B) you expect interest rates to fall C) gold becomes more liquid D) stock prices are expected to fall

C

An increase in the interest rate ________. A) increases the demand for money B) increases the quantity of money demanded C) decreases the demand for money D) decreases the quantity of money demanded

D

Everything else held constant, when stock prices become less volatile, the demand curve for bonds shifts to the ______ and the interest rate ________. A) right; rises B) right; falls C) left; falls D) left; rises

D

If gold becomes acceptable as a medium of exchange, the demand for gold will _______ and the demand for bonds will ________, everything else held constant. A) decrease; decrease B) decrease; increase C) increase; increase D) increase; decrease

D

A business cycle expansion increases income, causing money demand to _______ and interest rates to ________, everything else held constant. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase

A

A lower level of income causes the demand for money to ________ and the interest rate to _______, everything else held constant. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase

A

A movement along the bond demand or supply curve occurs when _______ changes. A) bond price B) income C) wealth D) expected return

A

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. A) increases B) decreases C) has no effect on D) erases

A

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 ________. A) rise; right B) rise; left C) fall; right D) fall; left

A

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 ________. A) liquidity effect is smaller than the expected inflation effect 最终and interest rates adjust quickly to changes in expected inflation B) liquidity effect is larger than the expected inflation effect and interest rates adjust quickly to changes in expected inflation C) liquidity effect is larger than the expected inflation effect and interest rates adjust slowly to changes in expected inflation D) liquidity effect is smaller than the expected inflation effect and interest rates adjust slowly to changes in expected inflation

A

Pieces of property that serve as a store of value are called ____. A) assets B) units of account C) liabilities D) borrowings

A

A decline in the expected inflation rate causes the demand for money to _______ and the demand curve to shift to the ________, everything else held constant. A) decrease; right B) decrease; left C) increase; right D) increase; left

B

A decrease in the brokerage commissions 佣金 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. A) demand; right B) demand; left C) supply; right D) supply; left

B

Everything else held constant, an increase in expected inflation, lowers the expected return on _______ compared to _______ assets. A) bonds; financial B) bonds; real C) physical; financial D) physical; real

B

If the price of bonds is set ______ the equilibrium price, the quantity of bonds demanded exceeds the quantity of bonds supplied, a condition called excess ________. A) above; demand B) above; supply C) below; demand D) below; supply

C

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 ________. A) Fisher effect is dominated by the liquidity effect and interest rates adjust slowly to changes in expected inflation B) liquidity effect is dominated by the Fisher effect and interest rates adjust slowly to changes in expected inflation C) liquidity effect is dominated by the Fisher effect 最初and interest rates adjust quickly to changes in expected inflation D) Fisher effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation

C

Everything else held constant, if the expected return on government bonds falls from 8 to 7 percent and the expected return on corporate bonds falls from 10 to 8 percent, then the expected return of corporate bonds ________ relative to government bonds and the demand for corporate bonds ________. A) rises; rises B) rises; falls C) falls; rises D) falls; falls

D

Everything else held constant, when bonds become less widely traded, and as a consequence the market becomes less liquid, the demand curve for bonds shifts to the ________ and the interest rate _______. A) right; rises B) right; falls C) left; falls D) left; rises

D

Everything else held constant, when households save less, wealth and the demand for bonds ________ and the bond demand curve shifts _______. A) increase; right B) increase; left C) decrease; right D) decrease; left

D

If the liquidity effect is smaller than the other effects, and the adjustment to expected inflation is immediate, then the ________. A) interest rate will fall B) interest rate will rise C) interest rate will fall immediately below the initial level when the money supply grows D) interest rate will rise immediately above the initial level when the money supply grows

D

If the price of gold becomes less volatile, then, other things equal, the demand for stocks will _______ and the demand for gold will ________. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase

D

In Keynes's liquidity preference framework, ________. A) the demand for bonds must equal the supply of money B) the demand for money must equal the supply of bonds C) an excess demand of bonds implies an excess demand for money D) an excess supply of bonds implies an excess demand for money 平衡

D

Everything else held constant, if the expected return on 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 bonds and the demand for GE stock ________. A) rises; rises B) rises; falls C) falls; rises D) falls; falls

A

Holding all other factors constant, the quantity demanded of an asset is ________. A) positively related to wealth B) negatively related to its expected return relative to alternative assets C) positively related to the risk of its returns relative to alternative assets D) negatively related to its liquidity relative to alternative assets

A

In the figure above, the price of bonds would fall from P1 to P2 if ________. A) inflation is expected to increase in the future B) interest rates are expected to fall in the future C) the expected return on bonds relative to other assets is expected to increase in the future D) the riskiness of bonds falls relative to other assets

A

In the market for money, an interest rate below equilibrium results in an excess ____ money and the interest rate will _____. A) demand for; rise B) demand for; fall C) supply of; fall D) supply of; rise

A

Milton Friedman called the response of lower interest rates resulting from an increase in the money supply the ___ _____ effect. A) liquidity B) price level C) expected-inflation D) income

A

If stock prices are expected to drop dramatically, then, other things equal, the demand for stocks will ________ and that of Treasury bills will ________. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase

D

In the 1990s Japan had the lowest interest rates in the world due to a combination of ________. A) inflation and recession B) deflation and expansion C) inflation and expansion D) deflation and recession

D

In the figure above, a factor that could cause the supply of bonds to shift to the right is ________. A) a decrease in government budget deficits B) a decrease in expected inflation C) a recession D) a business cycle expansion

D

Interest rates increased continuously during the 1970s. The most likely explanation is ________. A) banking failures that reduced the money supply B) a rise in the level of income C) the repeated bouts of recession and expansion D) increasing expected rates of inflation

D

Keynes assumed that money has __ ______ rate of return. A) a positive B) a negative C) a zero D) an increasing

C

Of the four factors that influence asset demand, which factor will cause the demand for all assets to increases, everything else held constant? A) Wealth B) Expected returns C) Risk D) Liquidity

A

The demand for silver decreases, other things equal, when ________. A) the gold market is expected to boom B) the market for silver becomes more liquid C) wealth grows rapidly D) interest rates are expected to rise

A

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 ________. A) Fisher effect is dominated by the liquidity effect 最初and interest rates adjust slowly to changes in expected inflation B) liquidity effect is dominated by the Fisher effect and interest rates adjust slowly to changes in expected inflation C) liquidity effect is dominated by the Fisher effect and interest rates adjust quickly to changes in expected inflation D) Fisher effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation

A

_______ in the money supply creates excess _______ money, causing interest rates to _______, everything else held constant. A) A decrease; demand for; rise B) An increase; demand for; fall C) An increase; supply of; rise D) A decrease; supply of; fall

A

If brokerage commissions 佣金; 手续费on bond sales decrease, then, other things equal, the demand for bonds will ________ and the demand for real estate 房地产will ________. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase

B

If fluctuations in interest rates become smaller, then, other things equal, the demand for stocks ________ and the demand for long-term bonds ________. A) increases; increases B) increases; decreases C) decreases; decreases D) decreases; increases

D

The demand curve for bonds has the usual downward slope, indicating that at ________ prices of the bond, everything else equal, the __ quantity demanded ______ is higher. A) higher; demand B) higher; quantity demanded C) lower; demand D) lower; quantity demanded

D

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 ________. A) liquidity effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation B) liquidity effect is larger than the expected inflation effect and interest rates adjust quickly to changes in expected inflation C) liquidity effect is larger than the expected inflation effect and interest rates adjust slowly to changes in expected inflation D) liquidity effect is smaller than the expected inflation effect 最终and interest rates adjust slowly to changes in expected inflation

D

The supply curve for bonds has the usual upward slope, indicating that as the price _______, ceteris paribus 其他条件相同, the ________ increases. A) falls; supply B) falls; quantity supplied C) rises; supply D) rises; quantity supplied

D

An increase in the expected rate of inflation will ________ the expected return on bonds relative to the that on ________ assets, everything else held constant. A) reduce; financial B) reduce; real C) raise; financial D) raise; real

B