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38 Cards in this Set
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A situation in which the quantity of bonds supplied exceeds the quantity of bonds demanded is called a condition of excess supply; because people want to sell ____ bonds than others want to buy, the price of bonds will_____. A. more; rise B. more; fall C. fewer; riseD. |
more;fall |
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If the price of gold becomes less volatile, then, other things equal, the demand for stocks will _____ and the demand for antiques will _____. A. Increase; decrease B. decrease; decrease C. decrease; increase |
decrease; decrease |
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Buy Microsoft stock if: (Less or More) You would be ____ willing to buy a share of Microsoft stock if your wealth falls because You would be _____ willing to buy a share of Microsoft stock if the bond market become more liquid because _______ You be ______ willing to buy a share of Microsoft stock if the bond market becomes more liquid because ______ You would be _____ to buy a share of Microsoft stock if you expect gold to appreciate in value because_____ You would be ____ willing to buy a share of Microsoft stock if prices in the bond market become more volatile because _______ |
Less; you have less money to spend on your potential losses More; you believe the amount of the return on your investment will be + LEss; you can now sell bonds easier than stocks Less; the return on gold relative to stocks has improved More; stocks become relatively safer than bonds |
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If the expected return on U.S. Treasury bonds falls from 10-5% and the expected return on GE stock rises from 7 to 8%, then the expected return of holding GE stock _____ relative to U.S. Treasury bonds and the demand for GE stock ____. A. Falls; Falls B. Rises; Rises C. Falls;Rises |
Rises; Rises |
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The demand for silver decreases, other things equal, when A.wealth grows B. the gold market is expected to boom C. interest rates are expected to rise |
the gold market is expected to boom |
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When the federal government sells a Treasury bond in the Primary market - via Treasury auction, it is: A.seeking a safe investment vehicle for the Social Security Trust Fund B. Seeking to finance government spending as an alternative to raising taxes C. increasing the money supply |
seeking to finance government spending as an alternative to raising taxes |
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Less or More willing to buy a house You just inherited 100,000 ______ Real Estate commisions fall from 6% of the sales price to 5%. ______ You expect the stock market to become more volatile ______ You expect housing prices to fall |
more, more, less, more, less |
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If the price of bonds is set _____ the equilibrium price, the quantity of bonds demanded exceeds the quantity of bonds supplied, a condition called excess _____ A.Below; Supply B. Above; Suppy C. Below; Demand |
Below; Demand |
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Everything else held constant, if the expected return on U.S. treasury bonds falls from 8% to 7% and the expcted return on corporate bonds falls from 10% to 8%, then the expected return of corporate bonds _____ to U.S. Treasury bonds and the demand for corporate bonds _____ A. Rises; Rises B. Rises; Falls C. Falls; Falls |
Falls; Falls |
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When the federal government sells a Treasury bond in the primary market - via Treasury auction, it is. A. Seeking to finance government spending as an alternative to raising taxes B. increasing the money supply C. Directly putting downward pressure on interest rates |
Seeking to finance gov't spending as an alternative to raising taxes |
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In the bond market, the bond demanders are the ____ and the bond suppliers are the ____ A. borrowers; advancers B. lenders; borrowers C. lenders; borrowers |
Lenders; borrowers |
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If the market price of a $1,200-face-value bond changes from $925 to $900, the YTM ______ (increases or decreases) by __% |
Increases; 3.6% |
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If the interest rate on a bond is above the equilibrium rate, there is an excess ____ for bonds and the bond price will ____ A.Demand; Rise B. Supply; Rise C. Supply; Fall |
Demand; Rise |
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When the price of a bond is _____ the equilibrium price, there is an excess demand for bonds and price will _____ A. Below; fall B. below; rise C. above; fall |
below; rise |
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More or less willing to buy AT&T bonds Trading in these bonds increases, making them easier to sell you expect a bear market in stocks (decline) Brokerage commissions on stocks fall You expect interest rates to rise Brokerage Commissions on bonds to fall |
more, more, less, less, more |
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Everything else held constant, a decrease in wealth A.increases the demand for stocks B. reduces the demand for silver C.increases the demand for gold |
reduces the demand for silver |
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If stock prices are expected to climb next year, everything else held constant, the _____ curve for bonds shifts _____ and the interest rate _____.
B. demand; left; falls C. supply; left; rises |
demand; left; rises |
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Everything else held constant, when stock prices become less volatile, the demand curve for bonds shifts to the ____ and the interest rate ____. A. Left; falls B. right; falls C. left; rises |
left; rises |
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A factor that could cause the demand for bonds to shift to the right is A. an increase in the expected rate of inflation B. a decrease in wealth C. expectations of lower interest rates in the future |
Expectations of lower interest rates in the future |
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What appropriate change in the money supply would cause an increase in interest rates? Only one would move |
Money supply would shift but demand wouldn't creating a higher price level |
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How will growth in GDP affect interest rates, holding the money supply constant? Only one moves |
Demand would shift right causing an increase in the price level |
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How might a sudden increase in people's expectations of future real estate prices affect interest rates? A. Interest rates would decrease because real estate would have a relatively higher rate of return compared to bonds, which would cause the demand for bonds to decrease. B.Interest rates would increase because real estate would have a relatively higher rate of return compared to bonds, which would cause the demand for bonds to decrease. |
B.Interest rates would increase because real estate would have a relatively higher rate of return compared to bonds, which would cause the demand for bonds to decrease. |
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Everything else held constant, an increase in the riskiness of bonds to alternative assets causes the demand for bonds to _____ and the demand curve to shift to the _____ A. fall; left B. fall; right C. rise; left |
fall;left |
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The reduction of brokerage commissions for trading common stocks that occurred in 1975 cause the demand for bonds to ____ and the demand curve to shift to the _____. A. rise; right B. rise; left C. fall; left |
fall; left |
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An increase in the expected return on common stocks would _____ the demand for bonds shifting the demand curve to the ______ A. decrease; left B. decrease; right C. increase; left |
decrease; left |
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M1 money growth in the U.S. was about 16% in 200, 7% in 2009, and 9% in 2010. over the same time period, the yield on 3-month Treasury bills feel almost 3% to close to 0%. why did the interest rates falll, rather than increase? A.the liquidity effect was working the same direction as the income, price level and expected inflation effect. B. the income, price-level, and expected-inflation effects were small relative to the liquidity effect. |
B. the income, price-level, and expected-inflation effects were small relative to the liquidity effect. |
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Explain the effect that a large federal deficit will have on interest. only moves supply |
supply moves right and give and increases the interest rate |
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Would fiscal policy makers ever have reason to worry about potentially inflationary conditions? A. No B. Yes, higher inflation leads to a higher debt service burden and increases the costs of financing deficit spending |
B. Yes, higher inflation leads to a higher debt service burden and increases the costs of financing deficit spending |
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When an economy grows out of a recession, normally the demand for bonds _____ and the supply of bonds ____, everything else held constant A. increases; increases B. decreases; increases C. decreases; decreases |
Increases; Increases |
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The interest rate falls when either the demand for bonds _____ or the supply of bonds _____. A. Increases; decreases B. decreases; increases C. increases; increases |
Increases; decreases |
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Why are interest rates pro cyclical with GDP? only supply moves but where? |
supply moves right increases interest rate. |
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Which market is most likely to graph Baa bonds? |
Demand shifting left |
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Which is most likely to produce a 10-year treaury note? |
only supply moves right |
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Holding everything else constant, if interest rates are expected to increase, the demand for bonds ______ and the demand curve shifts A. decreases; left B. decreases; right C. increases; right |
decreases; left |
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In the Keynes's liquidity preference framework, if there is excess demand for money, there is A.an excess demand for bonds B. too much money C. an excess supply of bonds |
excess supply of bonds |
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What will happen to interest rates if there is a rise in the riskiness of bonds Using liquidity framework, an increase in the riskiness of bonds will cause A.an increase in the demand for money and no change in the quantity of money and a higher interest rate. B.an increase in the demand for money, no change in the quantity of money, and a lower interest rate. C. a decrease in the demand for money, no change in the quantity of money and higher interest rate. |
supply would decrease and shift left creating a new equilibrium point an increase in the demand for money and no change in the quantity of money and a higher interest rate. |
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During a business cycle expansion, the supply of bonds shifts to the _____ as businesses perceive more profitable investment opportunities, while demand for bonds shifts to the ______ as a result of the increase in wealth generated by the economic expansion. A.right; right B. left; right C. left; left |
right; right |
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In a business cycle expansion, the ____ of bonds increases and the _____ curve shifts to the _____ as business investments are expected to be more profitable. A. supply; supply; right B. demand; demand; right C. supply; supply; left |
supply; supply; right |
