Exam 4: Why Do Interest Rates Change

Use the following figure to answer the questions : Figure 4.4: -Figure 4.4 illustrates the effect of an increased rate of money supply growth. From the figure, one can conclude that the liquidity effect is ________ than the expected inflation effect and interest rates adjust ________ to changes in expected inflation.

When the federal government's budget deficit increases, the ________ curve for bonds shifts to the ________.

When the expected inflation rate decreases, the demand for bonds ________, the supply of bonds ________, and the interest rate ________.

Use the following figure to answer the questions : Figure 4.4: -Figure 4.4 illustrates the effect of an increased rate of money supply growth. From the figure, one can conclude that the

A rise in the price level causes the demand for money to ________ and the demand curve to shift to the ________

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

In a recession when income and wealth are falling, the demand for bonds ________ and the demand curve shifts to the ________.

Use the following figure to answer the questions : Figure 4.3: -In Figure 4.3, an increase in the interest rate from i₂ to i₁ can be explained by

When the federal government's budget deficit decreases, the demand curve for bonds shifts to the right.

When bond prices become less volatile, the demand for bonds ________ and the interest rate ________.

When the growth rate of the money supply decreases, interest rates end up being permanently lower if

An increase in the expected rate of inflation will ________ the expected return on bonds relative to that on ________ assets, and shift the ________ curve to the left.

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

Factors that cause the demand curve for bonds to shift to the left include

The economist Irving Fisher, after whom the Fisher effect is named, explained why interest rates ________ as the expected rate of inflation ________.

A higher level of income causes the demand for money to ________ and the interest rate to ________

Use the following figure to answer the questions : Figure 4.3: -In Figure 4.3, the factor responsible for the decline in the interest rate is

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

When the expected inflation rate increases, the demand for bonds ________, the supply of bonds ________, and the interest rate ________.

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