Exam 5: The Behavior of Interest Rates

Everything else held constant,when the government has higher budget deficits

-In the figure above,the factor responsible for the decline in the interest rate is

The supply curve for bonds has the usual upward slope,indicating that as the price ________,ceteris paribus,the ________ increases.

Factors that can cause the supply curve for bonds to shift to the right include

A return to the gold standard,that is,using gold for money will ________ the ________ for gold,________ its price,everything else held constant.

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

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

If the expected return on bonds increases,all else equal,the demand for bonds increases,the price of bonds ________,and the interest rate ________.

A situation in which the quantity of bonds supplied exceeds the quantity of bonds demanded is called a condition of excess supply; because people want to sell ________ bonds than others want to buy,the price of bonds will ________.

If stock prices are expected to drop dramatically,then,other things equal,the demand for stocks will ________ and that of Treasury bills will ________.

When the growth rate of the money supply is increased,interest rates will fall immediately if the liquidity effect is ________ than the other money supply effects and there is ________ adjustment of expected inflation.

Everything else held constant,if the expected return on U.S.Treasury 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 U.S.Treasury bonds and the demand for corporate bonds ________.

The interest rate falls when either the demand for bonds ________ or the supply of bonds ________.

The demand for Picasso paintings rises (holding everything else equal)when

-In the figure above,the decrease in the interest rate from i₁ to i₂ can be explained by

In the loanable funds framework,the ________ curve of bonds is equivalent to the ________ curve of loanable funds.

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 ________.

When rare coin prices become volatile,the ________ curve for bonds shifts to the ________,everything else held constant.

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 ________.

When the price level falls,the ________ curve for nominal money ________,and interest rates ________,everything else held constant.