Exam 5: The Behavior of Interest Rates

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

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

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

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

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 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 ________.

-In the figure above,one factor NOT responsible for the decline in the demand for money is

In Keynes's liquidity preference framework,individuals are assumed to hold their wealth in two forms

Everything else held constant,when stock prices become ________ volatile,the demand curve for bonds shifts to the ________ and the interest rate ________.

Both the CAPM and APT suggest that an asset should be priced so that it has a higher expected return

If the Fed wants to permanently lower interest rates,then it should raise the rate of money growth if

-In the figure above,a factor that could cause the demand for bonds to decrease (shift to the left)is

In the bond market,the bond demanders are the ________ and the bond suppliers are the ________.

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

Holding the expected return on bonds constant,an increase in the expected return on common stocks would ________ the demand for bonds,shifting the demand curve to the ________.

When the price level ________,the demand curve for money shifts to the ________ and the interest rate ________,everything else held constant.

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.

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

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