Homework 3 (Econ)

What is the opportunity cost of holding ​$500 in cash if the relevant interest rate is 88 ​percent? If the interest rates rise, the opportunity cost will be? If the interest rates rise, the oppt cost will ___, and individual will hold ___ cash balances.

500 (.80) = $40 Will increase will holder smaller cash balances

If the demand for bonds shifts to the​ left, the price of bonds A. ​decreases, and interest rates rise. Your answer is correct.B. ​increases, and interest rates fall. C. ​increases, and interest rates rise. D. ​decreases, and interest rates fall.

A

Suppose there is​ a/an increase in the growth rate of the money supply. If the liquidity effect is smaller than the​ output, price-level, and expected inflation​ effects, then, in the long​ run, interest rates A. rise when compared to their initial value.rise when compared to their initial value. B. remain unchanged when compared to their initial value. C. fall compared to their initial value.fall compared to their initial value. D. become unpredictable.

A

Suppose there is an increase in the growth rate of the money supply. If the liquidity effect is smaller than the​ income, price-level, and expected inflation​ effects, and if inflationary expectations adjust​ slowly, then in the short​ run, interest rates A. fall. B. become unpredictable. C. rise. D. remain unchanged.

A.

If the price of bonds is above the equilibrium​ price, there occurs an excess A. demand for bonds comma the price of bonds will rise comma and the interest rate will fall.demand for bonds, the price of bonds will rise, and the interest rate will fall. B. supply of bonds comma the price of bonds will fall comma and the interest rate will rise.supply of bonds, the price of bonds will fall, and the interest rate will rise. C. supply of​ bonds, the price of bonds will​ rise, and the interest rate will fall. D. demand for​ bonds, the price of bonds will​ fall, and the interest rate will rise.

B

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

B

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

C

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

C

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

C

Along the supply curve for​ bonds, a decrease in the price of bonds A. increases the interest rate and increases the quantity of bonds supplied. B. decreases the interest rate and increases the quantity of bonds supplied.decreases the interest rate and increases the quantity of bonds supplied. C. decreases the interest rate and decreases the quantity of bonds supplied. D. increases the interest rate and decreases the quantity of bonds supplied.

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; left B. ​fall; right C. ​rise; right D. ​fall; left

D

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

D

In the long​ run, if the​ output, price-level, and expected inflation effects outweigh the liquidity​ effect, to reduce interest rates the Federal Reserve should A. increase the growth rate of the money supply.increase the growth rate of the money supply. B. become unpredictable by varying the growth rate of the money supply without releasing the information to the public. C. maintain the growth rate of the money supply. D. decrease the growth rate of the money supply.

D

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. ​supply; fall C. ​supply; rise D. ​demand; fall

D

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. erases C. decreases D. has no effect on

A

When the growth rate of the money supply​ increases, interest rates end up being permanently lower if A. the liquidity effect is larger than the other effects. B. there is fast adjustment of expected inflation. C. the expected inflation effect is larger than the liquidity effect. D. there is slow adjustment of expected inflation.

A

When the wealth of individuals increases, A. the price of bonds increases while the interest rates decrease. B. the price of bonds decreases while the interest rates increase. C. both the price of bonds decreases while the interest rates increase. D. both the price of bonds and interest rates decrease

A

If wealth​ increases, the demand for stocks​ ________ and that of longminus−term bonds​ ________, everything else held constant. A. ​increases; increases B. ​decreases; increases C. ​increases; decreases D. ​decreases; decreases

A.

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. ​supply; rise B. ​demand; rise C. ​demand; fall D. ​supply; fall

C

If the supply of bonds shifts to the right​, the price of bonds ________ ​, and the interest rate _____ .

decrease and increase

Continuing on the same train of​ thought, when the Fed decrease the growth rate of the money​ supply, the price level effect drives the interest rate ▼ rise fall remain the same while the expected inflation rate pushes the interest rate to ▼ rise fall remain the same .

fall and fall

When the Federal Reserve nbsp increases the growth rate of the money​ supply, the income effect causes the interest rate to ▼ rise fall remain the same while the liquidity effect drives the interest rate ▼ down up .

rise and down