Exam 4: Why Do Interest Rates Change

When the price of a bond is above the equilibrium price, there is excess ________ in the bond market and the price will ________.

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

An increase in the inflation rate will cause the demand curve for bonds to shift to the right.

Higher expected interest rates in the future ________ the demand for long-term bonds and shift the demand curve to the ________.

A ________ prefers stock in a less risky asset than in a riskier asset.

Diversification benefits an investor by

When people begin to expect a large run up in stock prices, the demand curve for bonds shifts to the ________ and the interest rate ________.

When interest rates decrease, the demand curve for bonds shifts to the left.

Figure 4.1 -In Figure 4.1, the most likely cause of the increase in the equilibrium interest rate from i₁ to i₂ is

Lower expected interest rates in the future ________ the demand for long-term bonds and shift the demand curve to the ________

A person who is risk averse prefers to hold assets that are more, not less, risky.

When the economy slips into a recession, normally the demand for bonds ________, the supply of bonds ________, and the interest rate ________.

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

When the interest rate on a bond is ________ the equilibrium interest rate, there is excess ________ in the bond market and the interest rate will ________.

When the demand for bonds ________ or the supply of bonds ________, bond prices rise.

When the interest rate on a bond is ________ the equilibrium interest rate, there is excess ________ in the bond market and the interest rate will ________.

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

When the interest rate on a bond is above the equilibrium interest rate, there is excess ________ in the bond market and the interest rate will ________.

When people begin to expect a large stock market decline, the demand curve for bonds shifts to the ________ and the interest rate ________.

________ is the total resources owned by an individual, including all assets.