Exam 4: Why Do Interest Rates Change

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

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

Determining asset prices using stocks of assets rather than flow is called

Milton Friedman contends that it is entirely possible that when the money supply rises, interest rates may ________ if the ________ effect is more than offset by changes in income, the price level, and expected inflation.

When prices in the stock market become more uncertain, the demand curve for bonds shifts to the ________ and the interest rate ________.

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

When bonds become less widely traded, and as a consequence the market becomes less liquid, the demand curve for bonds shifts to the ________ and the interest rate ________.

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

During business cycle expansions when income and wealth are rising, the demand for bonds ________ and the demand curve shifts to the ________.

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 ________.

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

The Fisher Effect predicts that an increase in expected inflation will lower the interest rate on bonds.

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

Identify and explain the four factors that influence asset demand. Which of these factors affect total asset demand and which influence investors to demand one asset over another?

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

When stock prices become less volatile, the demand curve for bonds shifts to the ________ and the interest rate ________.

What is the model whose equations are estimated using statistical procedures used in forecasting interest rates called?

If investors perceive greater interest rate risk, what will happen to the equilibrium interest rate in the bond market? Explain using the bond demand and supply framework.

When income and wealth are rising, the demand for bonds rises and the demand curve shifts to the right.

An increase in the federal government budget deficit will raise the interest rate on bonds.