ECO4223 Exam 2: Questions With Complete Solutions
(100% Correct)
During a recession, the supply of bonds______, and the supply curve shifts to
the___________, everything else held constant.
a. increases; right
b. decreases; left
c. increases; left
d. decreases; right Correct Ans - decreases; left
In the bond market, the market equilibrium shows the market-clearing ________
and market-clearing ________.'
a. price; interest rate
b. price; deposit
c. interest rate; premium
d. interest rate; deposit Correct Ans - price; interest rate
Everything else held constant, when stock prices become less volatile, the
demand curve for bonds shifts to the _________, and the interest rate
________________.
a. right; rises
b. left;falls
c. left; rises
d. right; falls Correct Ans - left; rises
When the expected inflation rate increases, the demand for bonds ________, the
supply of bonds ________, and the interest rate ________, everything else held
constant.
a. decreases, increases, rises
b. decreases, decreases, falls
c. increases, increases, rises
d. increases, decreases, falls Correct Ans - decreases, increases, rises
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.
a. falls; left
b. rises, right
, c. falls, right
d. rises, left Correct Ans - rises, right
When the expected inflation rate increases, the real cost of borrowing ______
and bond supply, everything else held constant.
a. increases, decreases
b. decreases, increases
c. increases, increases
d. decreases, decreases Correct Ans - decreases, increases
If the nominal rate of interest is 2 percent and the expected inflation rate is -
10 percent, the real rate of interest is
a. 12 percent
b. 2 percent
c. 8 percent
d. 10 percent Correct Ans - 12 percent
The supply curve for bonds has the usual upward slope indicating that as
price ________, ceterus paribus, the _________ increases.
a. falls, quantity supplied
b. rises, supply
c. rises; quantity supplied
d. falls, supply Correct Ans - rises, quantity supplied.
When the inflation rate is expected to increase, the ________ for bonds falls,
while the ___________ curve shifts to the right, everything else held constant.
a. demand, demand
b. supply, supply
c. demand, supply
d. supply, demand Correct Ans - demand, supply
The monetary base minus reserves equals
a. money supply
b. federal funds
c. checking deposits
d. currency in circulation Correct Ans - currency in circulation
Monetary Aggregates are
a. measures of the wealth of individuals
(100% Correct)
During a recession, the supply of bonds______, and the supply curve shifts to
the___________, everything else held constant.
a. increases; right
b. decreases; left
c. increases; left
d. decreases; right Correct Ans - decreases; left
In the bond market, the market equilibrium shows the market-clearing ________
and market-clearing ________.'
a. price; interest rate
b. price; deposit
c. interest rate; premium
d. interest rate; deposit Correct Ans - price; interest rate
Everything else held constant, when stock prices become less volatile, the
demand curve for bonds shifts to the _________, and the interest rate
________________.
a. right; rises
b. left;falls
c. left; rises
d. right; falls Correct Ans - left; rises
When the expected inflation rate increases, the demand for bonds ________, the
supply of bonds ________, and the interest rate ________, everything else held
constant.
a. decreases, increases, rises
b. decreases, decreases, falls
c. increases, increases, rises
d. increases, decreases, falls Correct Ans - decreases, increases, rises
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.
a. falls; left
b. rises, right
, c. falls, right
d. rises, left Correct Ans - rises, right
When the expected inflation rate increases, the real cost of borrowing ______
and bond supply, everything else held constant.
a. increases, decreases
b. decreases, increases
c. increases, increases
d. decreases, decreases Correct Ans - decreases, increases
If the nominal rate of interest is 2 percent and the expected inflation rate is -
10 percent, the real rate of interest is
a. 12 percent
b. 2 percent
c. 8 percent
d. 10 percent Correct Ans - 12 percent
The supply curve for bonds has the usual upward slope indicating that as
price ________, ceterus paribus, the _________ increases.
a. falls, quantity supplied
b. rises, supply
c. rises; quantity supplied
d. falls, supply Correct Ans - rises, quantity supplied.
When the inflation rate is expected to increase, the ________ for bonds falls,
while the ___________ curve shifts to the right, everything else held constant.
a. demand, demand
b. supply, supply
c. demand, supply
d. supply, demand Correct Ans - demand, supply
The monetary base minus reserves equals
a. money supply
b. federal funds
c. checking deposits
d. currency in circulation Correct Ans - currency in circulation
Monetary Aggregates are
a. measures of the wealth of individuals
