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ECO4223 EXAM 2 QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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ECO4223 EXAM 2 QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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ECO4223 EXAM 2 QUESTIONS ANDANSWERS WITH SOLUTIONS 2024
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 - ANSWER 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 - ANSWER 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 - ANSWER 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 - ANSWER 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 - ANSWER 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 - ANSWER 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 - ANSWER 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 - ANSWER 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
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