Chapter 5, 14,15,16 (Mid-Term), Money
and Banking CH 5, Econ Chapter 5 part
2, econ206 chapter 5, Econ 2035 Ch5.1,
2035 Chapter 5, Money and Banking Ch
5, Chapter 3 FINC 3700, Chapter 4, Econ
2035 Ch4.3, Money & Banking HW #2,
Econ 3229 quiz 4, Money...
Chapter 5, 14,15,16 (Mid-Term), Money
and Banking CH 5, Econ Chapter 5 part
2, econ206 chapter 5, Econ 2035 Ch5.1,
2035 Chapter 5, Money and Banking Ch
5, Chapter 3 FINC 3700, Chapter 4, Econ
2035 Ch4.3, Money & Banking HW #2,
Econ 3229 quiz 4, Money...
3) 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; right
B) falls; left
C) rises; right
D) rises; left - ANSWER- C) rises; right
10) 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) right; falls
C) left; falls
D) left; rises - ANSWER- D) left; rises
15) Factors that decrease the demand for bonds include
A) an increase in the volatility of stock prices.
B) a decrease in the expected returns on stocks.
C) a decrease in the inflation rate.
,Chapter 5, 14,15,16 (Mid-Term), Money
and Banking CH 5, Econ Chapter 5 part
2, econ206 chapter 5, Econ 2035 Ch5.1,
2035 Chapter 5, Money and Banking Ch
5, Chapter 3 FINC 3700, Chapter 4, Econ
2035 Ch4.3, Money & Banking HW #2,
Econ 3229 quiz 4, Money...
D) a decrease in the riskiness of stocks. - ANSWER- D) a decrease in the riskiness of
stocks
23) When the expected inflation rate increases, the demand for bonds ________, the
supply of bonds ________, and the interest rate ________, everything else held
constant.
A) increases; increases; rises
B) decreases; decreases; falls
C) increases; decreases; falls
D) decreases; increases; rises - ANSWER- D) decreases; increases; rises
27) When the economy slips into a recession, normally the demand for bonds
________, the supply of bonds ________, and the interest rate ________, everything
else held constant.
A) increases; increases; rises
B) decreases; decreases; falls
C) increases; decreases; falls
D) decreases; increases; rises - ANSWER- B) decreases; decreases; falls
45) A factor that could cause the supply of bonds to shift to the right is
A) a decrease in government budget deficits.
B) a decrease in expected inflation.
C) a recession.
D) a business cycle expansion. - ANSWER- D) a business cycle expansion
46) A factor that could cause the demand for bonds to decrease (shift to the left) is
A) an increase in the expected return on bonds relative to other assets.
B) a decrease in the expected return on bonds relative to other assets.
C) an increase in wealth.
D) a reduction in the riskiness of bonds relative to other assets. - ANSWER- B) a
decrease in the expected return on bonds relative to other assets
48) A factor that could cause the supply of bonds to increase (shift to the right) is
A) a decrease in government budget deficits.
,Chapter 5, 14,15,16 (Mid-Term), Money
and Banking CH 5, Econ Chapter 5 part
2, econ206 chapter 5, Econ 2035 Ch5.1,
2035 Chapter 5, Money and Banking Ch
5, Chapter 3 FINC 3700, Chapter 4, Econ
2035 Ch4.3, Money & Banking HW #2,
Econ 3229 quiz 4, Money...
B) a decrease in expected inflation.
C) expectations of more profitable investment opportunities.
D) a business cycle recession - ANSWER- C) expectations of more profitable
investment opportunities
49) A factor that could cause the demand for bonds to shift to the right is
A) an increase in the riskiness of bonds relative to other assets.
B) an increase in the expected rate of inflation.
C) expectations of lower interest rates in the future.
D) a decrease in wealth. - ANSWER- C) expectations of lower interest rates in the
future
7) In Keynes's liquidity preference framework, as the expected return on bonds
increases (holding everything else unchanged), the expected return on money
________, causing the demand for ________ to fall.
A) falls; bonds
B) falls; money
C) rises; bonds
D) rises; money - ANSWER- B) falls; money
5) In the Keynesian liquidity preference framework, a rise in the price level causes the
demand for money to ________ and the demand curve to shift to the ________,
everything else held constant.
A) increase; left
B) increase; right
C) decrease; left
D) decrease; right - ANSWER- B) increase; right
9) A decline in the expected inflation rate causes the demand for money to ________
and the demand curve to shift to the ________, everything else held constant.
A) decrease; right
B) decrease; left
C) increase; right
D) increase; left - ANSWER- B) decrease; left
, Chapter 5, 14,15,16 (Mid-Term), Money
and Banking CH 5, Econ Chapter 5 part
2, econ206 chapter 5, Econ 2035 Ch5.1,
2035 Chapter 5, Money and Banking Ch
5, Chapter 3 FINC 3700, Chapter 4, Econ
2035 Ch4.3, Money & Banking HW #2,
Econ 3229 quiz 4, Money...
14) When the price level falls, the ________ curve for nominal money ________, and
interest rates ________, everything else held constant.
A) demand; decreases; fall
B) demand; increases; rise
C) supply; increases; rise
D) supply; decreases; fall - ANSWER- A) demand; decreases; fall
6) When the growth rate of the money supply increases, interest rates end up being
permanently lower if
A) the liquidity effect is larger than the other effects.
B) there is fast adjustment of expected inflation.
C) there is slow adjustment of expected inflation.
D) the expected inflation effect is larger than the liquidity effect. - ANSWER- A) the
liquidity effect is larger than the other effects
9) If the liquidity effect is smaller than the other effects, and the adjustment to expected
inflation is slow, then the
A) interest rate will fall.
B) interest rate will rise.
C) interest rate will initially fall but eventually climb above the initial level in response to
an increase in money growth.
D) interest rate will initially rise but eventually fall below the initial level in response to an
increase in money growth. - ANSWER- C) interest rate will initially fall but eventually
climb above the initial level in response to an increase in money growth
15) The figure above illustrates the effect of an increased rate of money supply growth
at time period T0. From the figure, one can conclude that the
A) liquidity effect is smaller than the expected inflation effect and interest rates adjust
quickly to changes in expected inflation.
B) liquidity effect is larger than the expected inflation effect and interest rates adjust
quickly to changes in expected inflation.
C) liquidity effect is larger than the expected inflation effect and interest rates adjust
slowly to changes in expected inflation.
