Exam 5: The Behavior of Interest Rates

The ________ the returns on two securities move together,the ________ benefit there is from diversification.

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.

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

The riskiness of an asset is measured by

Everything else held constant,an increase in expected inflation,lowers the expected return on ________ compared to ________ assets.

Everything else held constant,if the expected return on ABC stock rises from 5 to 10 percent and the expected return on CBS stock is unchanged,then the expected return of holding CBS stock ________ relative to ABC stock and the demand for CBS stock ________.

The bond supply curve is ________ sloping,indicating a(n)________ relationship between the price and quantity supplied of bonds.

When the Fed decreases the money stock,the money supply curve shifts to the ________ and the interest rate ________,everything else held constant.

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.

Use demand and supply analysis to explain why an expectation of Fed rate hikes would cause Treasury prices to fall.

Using the liquidity preference framework,what will happen to interest rates if the Fed increases the money supply?

-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

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.

________ in the money supply creates excess ________ money,causing interest rates to ________,everything else held constant.

Discovery of new gold in Alaska will ________ the ________ of gold,________ its price,everything else held constant.

In Keynes's liquidity preference framework,if there is excess demand for money,there is

Everything else held constant,a decrease in wealth

If the liquidity effect is smaller than the other effects,and the adjustment to expected inflation is slow,then the

The risk of a well-diversified portfolio depends only on the ________ risk of the assets in the portfolio.

You would be less willing to purchase U.S.Treasury bonds,other things equal,if