Chapter 5 The Behavior of Interest Rates

Multiple Choice
)1 If wealth increases, the demand for stocks _____ and that of long-term bonds _____. ()a increases; increases ()b increases; decreases ()c decreases; decreases ()d decreases; increases Answer: Q estion !tat s: "re#io s $dition )% If wealth decreases, the demand for stocks _____ and that of long-term bonds _____. ()e increases; increases ()f increases; decreases ()g decreases; decreases ()h decreases; increases Answer: Q estion !tat s: "re#io s $dition )& If wealth decreases, the demand for common stocks _____ and that of long-term bonds _____. ()i increases; increases ()' increases; decreases ()k decreases; decreases ()l decreases; increases Answer: Q estion !tat s: "re#io s $dition )( A decrease in wealth ()m increases the demand for stocks. ()n increases the demand for bonds. ()o has no effect on bond demand. ()) increases the demand for ho sing. ()* red ces the demand for ho sing. Answer: Q estion !tat s: +ew

1&1,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

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If the e0)ect ret rn on 1- stock increases from & to 2 )ercent, and the ret rn on 3" stock increases from 2 to 1% )ercent, the e0)ected ret rn of holding 1- stock ________ relati#e to 3" stock and the demand for 1- stock _________. ()r rises; rises ()s rises; falls ()t falls; falls () falls; rises ()# remains nchanged; remains nchanged Answer: Q estion !tat s: +ew

)2

If the e0)ected ret rn on A45 stock rises from / to 16 )ercent and the e0)ected ret rn on 54! stock is nchanged, then the e0)ected ret rn of holding 54! stock _____ relati#e to A45 stock and the demand for 54! stock _____. ()w rises; rises ()0 rises; falls ()7 falls; rises ()8 falls; falls Answer: Q estion !tat s: "re#io s $dition

)9

If the e0)ected ret rn on A45 stock falls from 16 to / )ercent and the e0)ected ret rn on 54! stock is nchanged, then the e0)ected ret rn of holding 54! stock _____ relati#e to A45 stock and the demand for 54! stock _____. ()aarises; rises ()bb rises; falls ()ccfalls; rises ()dd falls; falls Answer: Q estion !tat s: :e#ised

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If the e0)ected ret rn on A45 stock is nchanged and the e0)ected ret rn on 54! stock falls from 16 to / )ercent, then the e0)ected ret rn of holding 54! stock _____ relati#e to A45 stock and the demand for A45 stock _____. ()eerises; rises ()ff rises; falls ()gg falls; rises ()hh falls; falls Answer: Q estion !tat s: :e#ised

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If the e0)ected ret rn on +45 stock rises from / to 16 )ercent and the e0)ected ret rn on 54! stock rises from 1% to 1; )ercent, then the e0)ected ret rn of holding 54! stock _____ relati#e to +45 stock and the demand for 54! stock _____. ()ii rises; rises ()'' rises; falls ()kk falls; rises ()ll falls; falls Answer: Q estion !tat s: "re#io s $dition

)16

If the e0)ected ret rn on 54! stock rises from / to 16 )ercent and the e0)ected ret rn on +45 stock rises from 1% to 1; )ercent, then the e0)ected ret rn of holding 54! stock _____ relati#e to +45 stock and the demand for 54! stock _____. ()mm rises; rises ()nn rises; falls ()oo falls; rises ())) falls; falls Answer: Q estion !tat s: "re#io s $dition

)11

If the e0)ected ret rn on >.!. <reas r7 bonds falls from 16 to / )ercent and the e0)ected ret rn on ?$ stock rises from 9 to ; )ercent, then the e0)ected ret rn of holding ?$ stock _____ relati#e to >.!. <reas r7 bonds and the demand for ?$ stock _____. ()** rises; rises ()rr rises; falls ()ss falls; rises ()tt falls; falls Answer: Q estion !tat s: "re#io s $dition

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If the e0)ected ret rn on >.!. <reas r7 bonds rises from / to 16 )ercent and the e0)ected ret rn on ?$ stock rises from 9 to ; )ercent, then the e0)ected ret rn of holding ?$ stock _____ relati#e to >.!. <reas r7 bonds and the demand for ?$ stock _____. () rises; rises ()## rises; falls ()ww falls; rises ()00 falls; falls Answer: Q estion !tat s: "re#io s $dition

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If ho sing )rices are s ddenl7 e0)ected to shoot ), then, other things e* al, the demand for ho ses will _____ and that of <reas r7 bills will _____. ()77 increase; increase ()88increase; decrease ()aaa decrease; decrease ()bbb decrease; increase Answer: Q estion !tat s: "re#io s $dition

1&&,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

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If interest rates on <reas r7 bonds are s ddenl7 e0)ected to shoot ), then, other things e* al, the demand for ho ses will _____ and that of <reas r7 bonds will _____. ()ccc increase; increase ()ddd increase; decrease ()eee decrease; decrease ()fff decrease; increase Answer: Q estion !tat s: "re#io s $dition

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If interest rates on <reas r7 bonds are s ddenl7 e0)ected to dro), then, other things e* al, the demand for ho ses will _____ and that of <reas r7 bonds will _____. ()ggg increase; increase ()hhh increase; decrease ()iii decrease; decrease ()''' decrease; increase Answer: Q estion !tat s: "re#io s $dition

)12

If stock )rices are e0)ected to dro) dramaticall7, then, other things e* al, the demand for stocks will _____ and that of <reas r7 bills will _____. ()kkk increase; increase ()lll increase; decrease ()mmm decrease; decrease ()nnn decrease; increase Answer: Q estion !tat s: "re#io s $dition

)19

@hen )eo)le begin to e0)ect a large stock market decline, the demand c r#e for bonds shifts to the _____ and the interest rate _____. ()ooo right; rises ()))) right; falls ()*** left; falls ()rrr left; rises Answer: Q estion !tat s: "re#io s $dition

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@hen )eo)le begin to e0)ect a r n ) in large stock market, the demand c r#e for bonds shifts to the _____ and the interest rate _____. ()sss right; rises ()ttt right; falls () left; falls ()### left; rises Answer: Q estion !tat s: "re#io s $dition

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If the e0)ected ret rn on :!< stock falls from ; to / )ercent and the e0)ected ret rn on ABC stock rises from & to ( )ercent, then the e0)ected ret rn of holding ABC stock ______ relati#e to :!< stock and demand for ABC stock ______. ()www rises; rises ()000 rises; falls ()777 falls; rises ()888 falls; falls Answer: Q estion !tat s: "re#io s $dition

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If the e0)ected ret rn on :!< stock declines from 1% to = )ercent and the e0)ected ret rn on ABC stock declines from ; to 9 )ercent, then the e0)ected ret rn of holding :!< stock ______ relati#e to ABC stock and demand for ABC stock _____. ()aaaa rises; rises ()bbbb rises; falls ()cccc falls; rises ()dddd falls; falls Answer: Q estion !tat s: "re#io s $dition

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If the e0)ected ret rn on >.!. <reas r7 bonds falls from ; to 9 )ercent and the e0)ected ret rn on cor)orate bonds falls from 16 to ; )ercent, then the e0)ected ret rn of cor)orate bonds ______ relati#e to >.!. <reas r7 bonds and the demand for cor)orate bonds _____. ()eeee rises; rises ()ffff rises; falls ()gggg falls; rises ()hhhh falls; falls Answer: Q estion !tat s: "re#io s $dition

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,or a holding )eriod of one 7ear the e0)ected ret rn on a consol is _____ the higher is the )rice of the consol toda7, and _____ the higher is the )rice of the consol ne0t 7ear. ()iiii higher; higher ()'''' higher; lower ()kkkk lower; higher ()llll lower; lower Answer: Q estion !tat s: "re#io s $dition

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Dolding the e0)ected ret rn on bonds constant, an increase in the e0)ected ret rn on common stocks wo ld _____ the demand for bonds, shifting the demand c r#e to the _____. ()mmmm decrease; left ()nnnn decrease; right ()oooo increase; left ())))) increase; right Answer: Q estion !tat s: "re#io s $dition

1&/,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

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Dolding the e0)ected ret rn on bonds constant, a decrease in the e0)ected ret rn on stocks wo ld _____ the demand for bonds, shifting the demand c r#e to the _____. ()**** decrease; left ()rrrr decrease; right ()ssss increase; left ()tttt increase; right Answer: Q estion !tat s: "re#io s $dition

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As the )rice of a bond falls and the e0)ected ret rn _____, bonds become _____ attracti#e to in#estors. () falls; less ()#### falls; more ()wwww rises; less ()0000 rises; more Answer: Q estion !tat s: "re#io s $dition

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As the )rice of a bond _____ and the e0)ected ret rn _____, bonds become more attracti#e to in#estors and the * antit7 demanded rises. ()7777 falls; rises ()8888 falls; falls ()aaaaa rises; rises ()bbbbb rises; falls Answer: Q estion !tat s: "re#io s $dition

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If interest rates are e0)ected to rise in the f t re, the demand for long-term bonds _____ and the demand c r#e shifts to the _____. ()ccccc rises; right ()ddddd rises; left ()eeeee falls; right ()fffff falls; left Answer: Q estion !tat s: "re#io s $dition

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If interest rates are e0)ected to fall in the f t re, the demand for long-term bonds toda7 _____ and the demand c r#e shifts to the _____. ()ggggg rises; right ()hhhhh rises; left ()iiiii falls; right ()''''' falls; left Answer: Q estion !tat s: "re#io s $dition

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Digher e0)ected interest rates in the f t re ____ the demand for long-term bonds toda7 and shift the demand c r#e to the _____. ()kkkkk increase; left ()lllll increase; right ()mmmmm decrease; left ()nnnnn decrease; right Answer: Q estion !tat s: "re#io s $dition

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1ower e0)ected interest rates in the f t re ____ the demand for long-term bonds toda7 and shift the demand c r#e to the _____. ()ooooo increase; left ()))))) increase; right ()***** decrease; left ()rrrrr decrease; right Answer: Q estion !tat s: "re#io s $dition

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<he red ction of brokerage commissions for trading common stocks that occ rred in 1=9/ ca sed the demand for bonds to _____ and the demand c r#e to shift to the _____. ()sssss fall; right ()ttttt fall, left () rise; right ()##### rise; left Answer: Q estion !tat s: "re#io s $dition

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If fl ct ations in interest rates become smaller, then, other things e* al, the demand for stocks _____ and the demand for long-term bonds _____. ()wwwww increases; increases ()00000 increases; decreases ()77777 decreases; decreases ()88888 decreases; increases Answer: Q estion !tat s: "re#io s $dition

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If fl ct ations in interest rates become larger, then, other things e* al, the demand for stocks _____ and the demand for long-term bonds _____. ()aaaaaa increases; increases ()bbbbbb increases; decreases ()cccccc decreases; decreases ()dddddd decreases; increases Answer: Q estion !tat s: "re#io s $dition

1&9,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

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If the )rice of gold becomes more #olatile, then, other things e* al, the demand for stocks will _____ and the demand for anti* es will _____. ()eeeeee increase; increase ()ffffff increase; decrease ()gggggg decrease; decrease ()hhhhhh decrease; increase Answer: Q estion !tat s: "re#io s $dition

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If the )rice of gold becomes less #olatile, then, other things e* al, the demand for stocks will _____ and the demand for anti* es will _____. ()iiiiii increase; increase ()'''''' increase; decrease ()kkkkkk decrease; decrease ()llllll decrease; increase Answer: Q estion !tat s: "re#io s $dition

)&2

If fl ct ations in interest rates become greater, then, other things e* al, the demand for common stocks _____ and that of long-term bonds _____. ()mmmmmm increases; increases ()nnnnnn increases; decreases ()oooooo decreases; decreases ())))))) decreases; increases Answer: Q estion !tat s: "re#io s $dition

)&9

If interest rates become more stable, then, other things e* al, the demand for common stocks _____ and that of long-term bonds _____. ()****** increases; increases ()rrrrrr increases; decreases ()ssssss decreases; decreases ()tttttt decreases; increases Answer: Q estion !tat s: "re#io s $dition

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If the )rice of real estate becomes less #olatile, then, other things e* al, the demand for stocks will _____ and that of anti* es will _____. () increase; increase ()###### increase; decrease ()wwwwww decrease; decrease ()000000 decrease; increase Answer: Q estion !tat s: "re#io s $dition

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@hen stock )rices become less #olatile, the demand c r#e for bonds shifts to the _____ and the interest rate _____. ()777777 right; rises ()888888 right; falls ()aaaaaaa left; falls ()bbbbbbb left; rises Answer: Q estion !tat s: "re#io s $dition

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@hen stock )rices become _____ #olatile, the demand c r#e for bonds shifts to the _____ and the interest rate _____. ()ccccccc more; right; rises ()ddddddd more; left; falls ()eeeeeee less; left; falls ()fffffff less; left; rises ()ggggggg less; right; falls Answer: Q estion !tat s: "re#io s $dition

)(1

@hen stock )rices become more #olatile, the demand c r#e for bonds shifts to the _____ and the interest rate _____. ()hhhhhhh right; rises ()iiiiiii right; falls ()''''''' left; falls ()kkkkkkk left; rises Answer: Q estion !tat s: "re#io s $dition

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@hen stock )rices become _____ #olatile, the demand c r#e for bonds shifts to the _____ and the interest rate _____. ()lllllll more; right; rises ()mmmmmmm more; left; falls ()nnnnnnn less; left; falls ()ooooooo less; left; rises ()))))))) more; right; falls Answer: Q estion !tat s: "re#io s $dition

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All else the same, an increase in the #olatilit7 of the stock market ca ses the demand for bonds to _____ and the demand c r#e to shift to the _____. ()******* fall; right ()rrrrrrr fall; left ()sssssss rise; right ()ttttttt rise; left Answer: Q estion !tat s: "re#io s $dition

1&=,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

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All else the same, a decrease in the #olatilit7 of the stock market ca ses the demand for bonds to _____ and the demand c r#e to shift to the _____. () fall; right ()####### fall; left ()wwwwwww rise; right ()0000000 rise; left Answer: Q estion !tat s: "re#io s $dition

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@hen bond interest rates become more #olatile, the demand for bonds _____ and the interest rate _____. ()7777777 increases; rises ()8888888 increases; falls ()aaaaaaaa decreases; falls ()bbbbbbbb decreases; rises Answer: Q estion !tat s: "re#io s $dition

)(2

@hen bond interest rates become less #olatile, the demand for bonds _____ and the interest rate _____. ()cccccccc increases; rises ()dddddddd increases; falls ()eeeeeeee decreases; falls ()ffffffff decreases; rises Answer: Q estion !tat s: "re#io s $dition

)(9

An increase in the riskiness of bonds relati#e to alternati#e assets ca ses the demand for bonds to _____ and the demand c r#e to shift to the _____. ()gggggggg rise; right ()hhhhhhhh rise; left ()iiiiiiii fall; right ()'''''''' fall; left Answer: Q estion !tat s: "re#io s $dition

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An increase in the riskiness of alternati#e assets relati#e to bonds ca ses the demand for bonds to _____ and the demand c r#e to shift to the _____. ()kkkkkkkk rise; right ()llllllll rise; left ()mmmmmmmm fall; right ()nnnnnnnn fall; left Answer: Q estion !tat s: "re#io s $dition

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@hen rare coin )rices become #olatile, the _________ c r#e for bonds shifts to the _______. ()oooooooo demand; right ())))))))) demand; left ()******** s ))l7; right ()rrrrrrrr s ))l7; left ()ssssssss s ))l7 and demand; left Answer: Q estion !tat s: !t d7 ? ide

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@hen bonds become more widel7 traded, and as a conse* ence the market becomes more li* id, the demand c r#e for bonds shifts to the _____ and the interest rate _____. ()tttttttt right; rises () right; falls ()######## left; falls ()wwwwwwww left; rises Answer: Q estion !tat s: "re#io s $dition

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@hen bonds become less widel7 traded, and as a conse* ence the market becomes less li* id, the demand c r#e for bonds shifts to the _____ and the interest rate _____. ()00000000 right; rises ()77777777 right; falls ()88888888 left; falls ()aaaaaaaaa left; rises Answer: Q estion !tat s: "re#io s $dition

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An increase in the li* idit7 of bonds res lts in a _____ in demand for bonds and the demand c r#e shifts to the _____. ()bbbbbbbbb rise; right ()ccccccccc rise; left ()ddddddddd fall; right ()eeeeeeeee fall; left Answer: Q estion !tat s: "re#io s $dition

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Increased li* idit7 of alternati#e assets _____ the demand for bonds and shifts the demand c r#e to the _____. ()fffffffff lowers; right ()ggggggggg lowers; left ()hhhhhhhhh raises; right ()iiiiiiiii raises; left Answer: Q estion !tat s: "re#io s $dition

1(1,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

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An increase in the e0)ected rate of inflation will _____ the e0)ected ret rn on bonds relati#e to the that on _____ assets. ()''''''''' red ce; financial ()kkkkkkkkk red ce; real ()lllllllll raise; financial ()mmmmmmmmm raise; real Answer: Q estion !tat s: "re#io s $dition

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An increase in the e0)ected rate of inflation will _____ the e0)ected ret rn on bonds relati#e to the that on _____ assets, and shift the _____ c r#e to the left. ()nnnnnnnnn red ce; financial; demand ()ooooooooo red ce; real; demand ()))))))))) raise; financial; s ))l7 ()********* raise; real; s ))l7 Answer: Q estion !tat s: "re#io s $dition

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A decrease in the e0)ected rate of inflation will _____ the e0)ected ret rn on bonds relati#e to the that on _____ assets. ()rrrrrrrrr red ce; financial ()sssssssss red ce; real ()ttttttttt raise; financial () raise; real Answer: Q estion !tat s: "re#io s $dition

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A decrease in the e0)ected rate of inflation will _____ the e0)ected ret rn on bonds relati#e to the that on _____ assets, and shift the _____ c r#e to the left. ()######### red ce; financial; demand ()wwwwwwwww red ce; real; demand ()000000000 raise; financial; s ))l7 ()777777777 raise; real; s ))l7 ()888888888 raise; real; demand Answer: Q estion !tat s: "re#io s $dition

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An increase in the e0)ected rate of inflation ca ses the demand for bonds to _____ and the demand c r#e to shift to the _____. ()aaaaaaaaaa fall; right ()bbbbbbbbbb fall; left ()cccccccccc rise; right ()dddddddddd rise; left Answer: Q estion !tat s: "re#io s $dition

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A decrease in the e0)ected rate of inflation ca ses the demand for bonds to _____ and the demand c r#e to shift to the _____. ()eeeeeeeeee fall; right ()fffffffffffall; left ()gggggggggg rise; right ()hhhhhhhhhh rise; left Answer: Q estion !tat s: "re#io s $dition

)26

<he demand c r#e for bonds has the s al downward slo)e, indicating that at _____ )rices of the bond, e#er7thing else e* al, the _____ is higher. ()iiiiiiiiii higher; demand ()'''''''''' higher; * antit7 demanded ()kkkkkkkkkk lower; demand ()llllllllll lower; * antit7 demanded Answer: Q estion !tat s: "re#io s $dition

)21

,actors that increase the demand for bonds incl de ()mmmmmmmmmm an increase in the inflation rate. ()nnnnnnnnnn an increase in the li* idit7 of common stocks. ()oooooooooo a decrease in the #olatilit7 of stock )rices. ())))))))))) all of the abo#e. ()********** none of the abo#e. Answer: Q estion !tat s: "re#io s $dition

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,actors that increase the demand for bonds incl de ()rrrrrrrrrran increase in the inflation rate. ()ssssssssss an decrease in the li* idit7 of common stocks. ()tttttttttt a decrease in the #olatilit7 of stock )rices. () all of the abo#e. Answer: Q estion !tat s: "re#io s $dition

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,actors that increase the demand for bonds incl de ()########## a decrease in the inflation rate. ()wwwwwwwwww an increase in the li* idit7 of stocks. ()0000000000 a decrease in the #olatilit7 of stock )rices. ()7777777777 all of the abo#e. ()8888888888 none of the abo#e. Answer: Q estion !tat s: "re#io s $dition

1(&,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

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,actors that increase the demand for bonds incl de ()aaaaaaaaaaa a decrease in the inflation rate. ()bbbbbbbbbbb an increase in the #olatilit7 of stock )rices. ()ccccccccccc an increase in the li* idit7 of stocks. ()ddddddddddd all of the abo#e. ()eeeeeeeeeee onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

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,actors that increase the demand for bonds incl de ()fffffffffff an increase in the #olatilit7 of stock )rices. ()ggggggggggg a decrease in the e0)ected ret rns on stocks. ()hhhhhhhhhhh a decrease in the inflation rate. ()iiiiiiiiiii all of the abo#e. ()''''''''''' onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

)22

,actors that increase the demand for bonds incl de ()kkkkkkkkkkk an increase in the #olatilit7 of stock )rices. ()lllllllllll an increase in the e0)ected ret rns on stocks. ()mmmmmmmmmmm an increase in the inflation rate. ()nnnnnnnnnnn onl7 (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

)29

,actors that decrease the demand for bonds incl de ()ooooooooooo an increase in the #olatilit7 of stock )rices. ()))))))))))) a decrease in the e0)ected ret rns on stocks. ()*********** a decrease in the inflation rate. ()rrrrrrrrrrr all of the abo#e. ()sssssssssss none of the abo#e. Answer: Q estion !tat s: "re#io s $dition

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,actors that decrease the demand for bonds incl de ()ttttttttttt an increase in the #olatilit7 of stock )rices. () an increase in the e0)ected ret rns on stocks. ()########### a decrease in the inflation rate. ()wwwwwwwwwww all of the abo#e. Answer: Q estion !tat s: "re#io s $dition

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,actors that decrease the demand for bonds incl de ()00000000000 an increase in the #olatilit7 of stock )rices. ()77777777777 a decrease in the e0)ected ret rns on stocks. ()88888888888 a decrease in the inflation rate. ()aaaaaaaaaaaa a decrease in the riskiness of stocks. Answer: Q estion !tat s: "re#io s $dition

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,actors that decrease the demand for bonds incl de ()bbbbbbbbbbbb an increase in the inflation rate. ()cccccccccccc an increase in the li* idit7 of stocks. ()dddddddddddd a decrease in the #olatilit7 of stock )rices. ()eeeeeeeeeeee all of the abo#e. ()ffffffffffff none of the abo#e. Answer: Q estion !tat s: "re#io s $dition

)91

,actors that decrease the demand for bonds incl de ()gggggggggggg an increase in the li* idit7 of stocks. ()hhhhhhhhhhhh a decrease in the #olatilit7 of stock )rices. ()iiiiiiiiiiiia decrease in the inflation rate. ()''''''''''''all of the abo#e. ()kkkkkkkkkkkk onl7 (a) and (b) of the abo#e. Q estion !tat s: "re#io s $dition

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,actors that decrease the demand for bonds incl de ()lllllllllllla decrease in the inflation rate. ()mmmmmmmmmmmm an increase in the #olatilit7 of stock )rices. ()nnnnnnnnnnnn an increase in the li* idit7 of stocks. ()oooooooooooo all of the abo#e. ())))))))))))) onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

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,actors that decrease the demand for bonds incl de ()************ a decrease in the inflation rate. ()rrrrrrrrrrrr an increase in the #olatilit7 of stock )rices. ()ssssssssssss an increase in the federal go#ernment b dget deficit. ()ttttttttttttan increase in the li* idit7 of stocks. Answer: Q estion !tat s: "re#io s $dition

1(/,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

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<he demand for Eackson "ollack )aintings rises (holding e#er7thing else e* al) when: () stocks become easier to sell. ()############ )eo)le e0)ect a boom in real estate )rices. ()wwwwwwwwwwww <reas r7 sec rities become riskier. ()000000000000 )eo)le s ddenl7 e0)ect gold )rices to rise. Answer: Q estion !tat s: "re#io s $dition

)9/

<he demand for 5harles -. : ssell )aintings declines (holding e#er7thing else e* al) when: ()777777777777 stocks become easier to sell. ()888888888888 )eo)le e0)ect a boom in real estate )rices. ()aaaaaaaaaaaaa <reas r7 sec rities become riskier. ()bbbbbbbbbbbbb all of the abo#e occ r. ()ccccccccccccc both (a) and (b) of the abo#e occ r. Answer: Q estion !tat s: "re#io s $dition

)92

<he demand for 5harles -. : ssell )aintings declines (holding e#er7thing else e* al) when: ()ddddddddddddd stocks become easier to sell. ()eeeeeeeeeeeee )eo)le e0)ect a boom in real estate )rices. ()fffffffffffff )eo)le s ddenl7 e0)ect gold )rices to rise. ()ggggggggggggg all of the abo#e occ r. ()hhhhhhhhhhhhh both (a) and (b) of the abo#e occ r. Answer: Q estion !tat s: "re#io s $dition

)99

<he demand for sil#er b llion decreases, other things e* al, when ()iiiiiiiiiiiii the gold market is s ddenl7 e0)ected to boom. ()''''''''''''' the market for sil#er b llion becomes more li* id. ()kkkkkkkkkkkkk wealth grows ra)idl7. ()lllllllllllll an7 of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

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<he demand for sil#er b llion increases, other things e* al, when ()mmmmmmmmmmmmm the gold market is s ddenl7 e0)ected to boom. ()nnnnnnnnnnnnn the market for sil#er b llion becomes more li* id. ()ooooooooooooo wealth grows ra)idl7. ()))))))))))))) an7 of the abo#e occ rs. ()************* either (b) or (c) of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1(2

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Bo wo ld be more willing to ) rchase >.!. <reas r7 bonds, other things e* al, if ()rrrrrrrrrrrrr 7o inherit F1 million from 7o r >ncle Darr7. ()sssssssssssss 7o e0)ect interest rates to fall. ()ttttttttttttt gold becomes more li* id. () an7 of the abo#e occ rs. ()############# either (a) or (b) of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

);6

Bo wo ld be more willing to ) rchase >.!. <reas r7 bonds, other things e* al, if ()wwwwwwwwwwwww 7o inherit F1 million from 7o r >ncle Darr7. ()0000000000000 7o e0)ect interest rates to rise. ()7777777777777 gold becomes more li* id. ()8888888888888 an7 of the abo#e occ rs. ()aaaaaaaaaaaaaa either (b) or (c) of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

);1

Bo wo ld be less willing to ) rchase >.!. <reas r7 bonds, other things e* al, if ()bbbbbbbbbbbbbb 7o inherit F1 million from 7o r >ncle Darr7. ()cccccccccccccc 7o e0)ect interest rates to fall. ()dddddddddddddd gold becomes more li* id. ()eeeeeeeeeeeeee an7 of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

);%

Bo wo ld be less willing to ) rchase >.!. <reas r7 bonds, other things e* al, if ()ffffffffffffff brokerage fees for trading stocks decline. ()gggggggggggggg 7o e0)ect interest rates to rise. ()hhhhhhhhhhhhhh gold becomes more li* id. ()iiiiiiiiiiiiii an7 of the abo#e occ rs. ()'''''''''''''' either (b) or (c) of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

);&

Bo wo ld be more willing to b 7 A<G< bonds (holding e#er7thing else constant) if ()kkkkkkkkkkkkkk the brokerage commissions on bond sales become chea)er. ()llllllllllllll interest rates are e0)ected to rise. ()mmmmmmmmmmmmmm 7o had s ffered big losses in the stock market. ()nnnnnnnnnnnnnn 7o e0)ected 'ewelr7 to a))reciate shar)l7 in #al e. ()oooooooooooooo none of the abo#e. Answer: Q estion !tat s: "re#io s $dition

1(9,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

);(

Bo wo ld be less willing to b 7 A<G< bonds (holding e#er7thing else constant) if ())))))))))))))) the brokerage commissions on bond sales rise. ()************** interest rates are e0)ected to rise. ()rrrrrrrrrrrrrr 7o e0)ected 'ewelr7 to a))reciate shar)l7 in #al e. ()ssssssssssssss an7 of the abo#e occ rs. ()tttttttttttttt either (a) or (c) of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

);/

Dolding e#er7thing else constant, () if asset AHs risk rises relati#e to that of alternati#e assets, the demand for asset A will fall. ()############## the more li* id asset A, relati#e to alternati#e assets, the greater will be the demand for asset A. ()wwwwwwwwwwwwww the lower the e0)ected ret rn to asset A relati#e to alternati#e assets, the greater will be the demand for asset A. ()00000000000000 all of the abo#e. ()77777777777777 onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

);2

Dolding e#er7thing else constant, ()88888888888888 if stock A45Hs risk rises relati#e to that of alternati#e assets, the demand for stock A45 will fall. ()aaaaaaaaaaaaaaathe less li* id is stock A45, relati#e to alternati#e assets, the greater will be the demand for stock A45. ()bbbbbbbbbbbbbbb the lower the e0)ected ret rn to stock A45 relati#e to alternati#e assets, the greater will be the demand for stock A45. ()ccccccccccccccconl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

);9

Dolding e#er7thing else constant, ()ddddddddddddddd if the risk of ABC stock rises relati#e to that of alternati#e assets, the demand ABC stock will fall. ()eeeeeeeeeeeeeeethe more li* id is stock ABC, relati#e to alternati#e assets, the greater will be the demand for stock ABC. ()fffffffffffffff the higher the e0)ected ret rn to stock ABC relati#e to alternati#e assets, the greater will be the demand for stock ABC. ()ggggggggggggggg all of the abo#e. ()hhhhhhhhhhhhhhh onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1(;

);;

Dolding e#er7thing else constant, ()iiiiiiiiiiiiiii if asset AHs risk rises relati#e to that of alternati#e assets, the demand will increase for asset A. ()''''''''''''''' the more li* id is asset A, relati#e to alternati#e assets, the greater will be the demand for asset A. ()kkkkkkkkkkkkkkk the lower the e0)ected ret rn to asset A relati#e to alternati#e assets, the greater will be the demand for asset A. ()lllllllllllllll onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

);=

<he demand for gold b llion increases, other things e* al, when ()mmmmmmmmmmmmmmm the market for sil#er b llion becomes more li* id. ()nnnnnnnnnnnnnnn interest rates are e0)ected to rise. ()ooooooooooooooo interest rates are e0)ected to fall. ()))))))))))))))) either (a) or (b) of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

)=6

Bo wo ld be less willing to ) rchase >.!. <reas r7 bonds, other things e* al, if ()*************** 7o e0)ect interest rates to fall. ()rrrrrrrrrrrrrrr gold becomes more li* id. ()sssssssssssssss 7o e0)ect bond )rices to rise. ()ttttttttttttttt either (a) or (b) of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

)=1

Bo wo ld be less willing to ) rchase >.!. <reas r7 bonds, other things e* al, if () 7o e0)ect interest rates to rise. ()############### gold becomes more li* id. ()wwwwwwwwwwwwwww 7o e0)ect bond )rices to rise. ()000000000000000 either (a) or (b) of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

)=%

Bo wo ld be less willing to ) rchase >.!. <reas r7 bonds, other things e* al, if ()777777777777777 7o e0)ect interest rates to rise. ()888888888888888gold becomes more li* id. ()aaaaaaaaaaaaaaaa 7o inherit F1 million from 7o r >ncle Darr7. ()bbbbbbbbbbbbbbbb an7 of the abo#e occ rs. ()cccccccccccccccc either (a) or (b) of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

1(=,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)=&

<he theor7 of asset demand )ro#ides a framework for deciding what factors ca se the demand c r#e for bonds shift. <hese factors incl de changes in the ()dddddddddddddddd wealth of in#estors. ()eeeeeeeeeeeeeeee li* idit7 of bonds relati#e to alternati#e assets. ()ffffffffffffffff e0)ected ret rns on bonds relati#e to alternati#e assets. ()gggggggggggggggg risk of bonds relati#e to alternati#e assets. ()hhhhhhhhhhhhhhhh all of the abo#e. Answer: Q estion !tat s: "re#io s $dition

)=(

In a recession when income and wealth are falling, the demand for bonds _____ and the demand c r#e shifts to the _____. ()iiiiiiiiiiiiiiii falls; right ()'''''''''''''''' falls; left ()kkkkkkkkkkkkkkkk rises; right ()llllllllllllllll rises; left Answer: Q estion !tat s: "re#io s $dition

)=/

I ring b siness c7cle e0)ansions when income and wealth are rising, the demand for bonds _____ and the demand c r#e shifts to the _____. ()mmmmmmmmmmmmmmmm falls; right ()nnnnnnnnnnnnnnnn falls; left ()oooooooooooooooo rises; right ())))))))))))))))) rises; left Answer: Q estion !tat s: "re#io s $dition

)=2

In an e0)anding econom7 with growing wealth, the demand for bonds _____ and the demand c r#e for bonds shifts to the _____. ()**************** rises; right ()rrrrrrrrrrrrrrrr rises; left ()ssssssssssssssss falls; right ()tttttttttttttttt falls; left Answer: Q estion !tat s: "re#io s $dition

)=9

In a contracting econom7 with declining wealth, the demand for bonds _____ and the demand c r#e for bonds shifts to the _____. () rises; right ()################ rises; left ()wwwwwwwwwwwwwwww falls; right ()0000000000000000 falls; left Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1/6

)=;

In an e0)anding econom7 with growing wealth, the demand for bonds _____ and the demand c r#e for bonds shifts to the _____. ()7777777777777777 rises; right ()8888888888888888 rises; left ()aaaaaaaaaaaaaaaaa falls; right ()bbbbbbbbbbbbbbbbb falls; left Answer: Q estion !tat s: "re#io s $dition

)==

In a contracting econom7 with declining wealth, the demand for bonds _____ and the demand c r#e for bonds shifts to the _____. ()ccccccccccccccccc rises; right ()ddddddddddddddddd rises; left ()eeeeeeeeeeeeeeeee falls; right ()fffffffffffffffff falls; left Answer: Q estion !tat s: "re#io s $dition

)166 <he s ))l7 c r#e for bonds has the s al )ward slo)e, indicating that as the )rice _____, ceteris )arib s, the _____ increases. ()ggggggggggggggggg falls; s ))l7 ()hhhhhhhhhhhhhhhhh falls; * antit7 s ))lied ()iiiiiiiiiiiiiiiii rises; s ))l7 ()''''''''''''''''' rises; * antit7 s ))lied Answer: Q estion !tat s: "re#io s $dition )161 ,actors that can ca se the s ))l7 c r#e for bonds to shift to the right incl de ()kkkkkkkkkkkkkkkkk an e0)ansion in o#erall economic acti#it7. ()lllllllllllllllll an increase in e0)ected inflation. ()mmmmmmmmmmmmmmmmm an increase in go#ernment deficits. ()nnnnnnnnnnnnnnnnn all of the abo#e. ()ooooooooooooooooo onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )16% ,actors that can ca se the s ))l7 c r#e for bonds to shift to the right incl de ()))))))))))))))))) an e0)ansion in o#erall economic acti#it7. ()***************** an increase in e0)ected inflation. ()rrrrrrrrrrrrrrrrr a decrease in go#ernment deficits. ()sssssssssssssssssall of the abo#e. ()ttttttttttttttttt onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

1/1,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)16& ,actors that can ca se the s ))l7 c r#e for bonds to shift to the right incl de () an e0)ansion in o#erall economic acti#it7. ()################# a decrease in e0)ected inflation. ()wwwwwwwwwwwwwwwww a decrease in go#ernment deficits. ()00000000000000000 all of the abo#e. ()77777777777777777 onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )16( ,actors that can ca se the s ))l7 c r#e for bonds to shift to the left incl de ()88888888888888888 a decrease in e0)ected inflation. ()aaaaaaaaaaaaaaaaaa a decrease in go#ernment deficits. ()bbbbbbbbbbbbbbbbbb an e0)ansion in o#erall economic acti#it7. ()cccccccccccccccccc all of the abo#e. ()dddddddddddddddddd onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )16/ ,actors that can ca se the s ))l7 c r#e for bonds to shift to the left incl de ()eeeeeeeeeeeeeeeeee an e0)ansion in o#erall economic acti#it7. ()ffffffffffffffffff a decrease in e0)ected inflation. ()gggggggggggggggggg an increase in go#ernment deficits. ()hhhhhhhhhhhhhhhhhh onl7 (a) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )162 ,actors that can ca se the s ))l7 c r#e for bonds to shift to the left incl de ()iiiiiiiiiiiiiiiiii an e0)ansion in o#erall economic acti#it7. ()'''''''''''''''''' an increase in e0)ected inflation. ()kkkkkkkkkkkkkkkkkk a decrease in go#ernment deficits. ()llllllllllllllllll all of the abo#e. ()mmmmmmmmmmmmmmmmmm onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )169 I ring an economic e0)ansion, the s ))l7 of bonds _____ and the s ))l7 c r#e shifts to the _____. ()nnnnnnnnnnnnnnnnnn increases; left ()oooooooooooooooooo increases; right ())))))))))))))))))) decreases; left ()****************** decreases; right Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1/%

)16; I ring a recession, the s ))l7 of bonds _____ and the s ))l7 c r#e shifts to the _____. ()rrrrrrrrrrrrrrrrrr increases; left ()ssssssssssssssssss increases; right ()tttttttttttttttttt decreases; left () decreases; right Answer: 5 Q estion !tat s: "re#io s $dition )16= An increase in e0)ected inflation ca ses the s ))l7 of bonds to _____ and the s ))l7 c r#e to shift to the _____. ()################## increase; left ()wwwwwwwwwwwwwwwwww increase; right ()000000000000000000 decrease; left ()777777777777777777 decrease; right Answer: Q estion !tat s: "re#io s $dition )116 Digher go#ernment deficits _____ the s ))l7 of bonds and shift the s ))l7 c r#e to the _____. ()888888888888888888 increase; left ()aaaaaaaaaaaaaaaaaaa increase; right ()bbbbbbbbbbbbbbbbbbb decrease; left ()ccccccccccccccccccc decrease; right Answer: Q estion !tat s: "re#io s $dition )111 @hen the inflation rate is e0)ected to increase, the e0)ected ret rn on bonds relati#e to real assets falls for an7 gi#en interest rate; the demand for bonds _____ and the demand c r#e shifts to the _____. ()ddddddddddddddddddd rises; right ()eeeeeeeeeeeeeeeeeee rises; left ()fffffffffffffffffff falls; right ()ggggggggggggggggggg falls; left Answer: Q estion !tat s: "re#io s $dition )11% @hen the inflation rate is e0)ected to increase, the real cost of borrowing declines at an7 gi#en interest rate; the s ))l7 of bonds _____ increases and the s ))l7 c r#e shifts to the _____. ()hhhhhhhhhhhhhhhhhhh increases; left ()iiiiiiiiiiiiiiiiiii increases; right ()''''''''''''''''''' decreases; left ()kkkkkkkkkkkkkkkkkkk decreases; right Answer: Q estion !tat s: "re#io s $dition

1/&,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)11& @hen the inflation rate is e0)ected to increase, the e0)ected ret rn on bonds relati#e to real assets falls for an7 gi#en interest rate; the _____ for bonds falls and the _____ c r#e shifts to the left. ()lllllllllllllllllll demand; demand ()mmmmmmmmmmmmmmmmmmm demand; s ))l7 ()nnnnnnnnnnnnnnnnnnn s ))l7; demand ()ooooooooooooooooooo s ))l7; s ))l7 Answer: Q estion !tat s: "re#io s $dition )11( @hen the inflation rate is e0)ected to increase, the real cost of borrowing declines at an7 gi#en interest rate; the _____ of bonds increases and the _____ c r#e shifts to the right. ()))))))))))))))))))) demand; demand ()******************* demand; s ))l7 ()rrrrrrrrrrrrrrrrrrr s ))l7; demand ()sssssssssssssssssss s ))l7; s ))l7 Answer: Q estion !tat s: "re#io s $dition )11/ An increase in the e0)ected rate of inflation ca ses the demand c r#e for bonds to _____ and the s ))l7 c r#e of bonds to _____. ()ttttttttttttttttttt fall; fall () fall; rise ()################### rise; fall ()wwwwwwwwwwwwwwwwwww rise; rise Answer: Q estion !tat s: "re#io s $dition )112 A decrease in the e0)ected rate of inflation ca ses the demand c r#e for bonds to _____ and the s ))l7 c r#e of bonds to _____. ()0000000000000000000 fall; fall ()7777777777777777777 fall; rise ()8888888888888888888 rise; fall ()aaaaaaaaaaaaaaaaaaaa rise; rise Answer: Q estion !tat s: "re#io s $dition )119 @hen the inflation rate is e0)ected to increase, the _____ for bonds falls, while the _____ c r#e shifts to the right. ()bbbbbbbbbbbbbbbbbbbb demand; demand ()cccccccccccccccccccc demand; s ))l7 ()dddddddddddddddddddd s ))l7; demand ()eeeeeeeeeeeeeeeeeeee s ))l7; s ))l7 Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1/(

)11; @hen the inflation rate is e0)ected to increase, the _____ of bonds increases while the _____ c r#e shifts to the left. ()ffffffffffffffffffff demand; demand ()gggggggggggggggggggg demand; s ))l7 ()hhhhhhhhhhhhhhhhhhhh s ))l7; demand ()iiiiiiiiiiiiiiiiiiii s ))l7; s ))l7 Answer: Q estion !tat s: "re#io s $dition )11= A decrease in e0)ected inflation shifts the demand for bonds to the ________, the s ))l7 of bonds to the ________, and the interest rate _______. ()'''''''''''''''''''' right; right; rises ()kkkkkkkkkkkkkkkkkkkk right; left; rises ()llllllllllllllllllll right; left; falls ()mmmmmmmmmmmmmmmmmmmm left; left; falls ()nnnnnnnnnnnnnnnnnnnn left; right; rises Answer: Q estion !tat s: !t d7 ? ide )1%6 @hen the inflation rate is e0)ected to rise, interest rates will ____; this res lt has been termed the _____. ()oooooooooooooooooooo fall; Je7nes effect ())))))))))))))))))))) fall; ,isher effect ()******************** rise; "igo effect ()rrrrrrrrrrrrrrrrrrrr rise; ,isher effect ()ssssssssssssssssssss rise; Je7nes effect Answer: Q estion !tat s: "re#io s $dition )1%1 $0)ectations of inflation ha#e a ma'or im)act on bond )rices and interest rates thro gh the ()tttttttttttttttttttt Je7nes effect. () ?ibson effect. ()#################### "igo effect. ()wwwwwwwwwwwwwwwwwwww ,isher effect. Answer: Q estion !tat s: "re#io s $dition )1%% <he economist Ir#ing ,isher, after whom the ,isher effect is named, e0)lained wh7 interest rates _____ as the e0)ected rate of inflation _____. ()00000000000000000000 rise; increases ()77777777777777777777 rise; stabili8es ()88888888888888888888 rise; decreases ()aaaaaaaaaaaaaaaaaaaaa fall; increases ()bbbbbbbbbbbbbbbbbbbbb fall; stabili8es Answer: Q estion !tat s: "re#io s $dition

1//,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)1%& I ring a b siness c7cle e0)ansion, the s ))l7 of bonds shifts to the _____ as b sinesses )ercei#e more )rofitable in#estment o))ort nities, while the demand for bonds shifts to the _____ as a res lt of the increase in wealth generated b7 the economic e0)ansion. ()ccccccccccccccccccccc right; left ()ddddddddddddddddddddd right; right ()eeeeeeeeeeeeeeeeeeeee left; left ()fffffffffffffffffffff left; right Answer: Q estion !tat s: "re#io s $dition )1%( I ring a b siness c7cle contraction, the s ))l7 of bonds shifts to the _____ as b sinesses )ercei#e fewer )rofitable in#estment o))ort nities, while the demand for bonds shifts to the _____ as a res lt of the decrease in wealth. ()ggggggggggggggggggggg right; left ()hhhhhhhhhhhhhhhhhhhhh right; right ()iiiiiiiiiiiiiiiiiiiii left; left ()''''''''''''''''''''' left; right Answer: Q estion !tat s: "re#io s $dition )1%/ @hen the )rice of a bond is abo#e the e* ilibri m )rice, there is an e0cess _____ for (of) bonds and )rice will _____. ()kkkkkkkkkkkkkkkkkkkkk demand; rise ()lllllllllllllllllllll demand; fall ()mmmmmmmmmmmmmmmmmmmmm s ))l7; fall ()nnnnnnnnnnnnnnnnnnnnn s ))l7; rise Answer: Q estion !tat s: "re#io s $dition )1%2 @hen the )rice of a bond is below the e* ilibri m )rice, there is an e0cess _____ for (of) bonds and )rice will _____. ()ooooooooooooooooooooo demand; rise ()))))))))))))))))))))) demand; fall ()********************* s ))l7; fall ()rrrrrrrrrrrrrrrrrrrrr s ))l7; rise Answer: Q estion !tat s: "re#io s $dition )1%9 @hen the )rice of a bond is _____ the e* ilibri m )rice, there is an e0cess s ))l7 of bonds and )rice will _____. ()sssssssssssssssssssss abo#e; rise ()ttttttttttttttttttttt abo#e; fall () below; fall ()##################### below; rise Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1/2

)1%; @hen the )rice of a bond is _____ the e* ilibri m )rice, there is an e0cess demand of bonds and )rice will _____. ()wwwwwwwwwwwwwwwwwwwww abo#e; rise ()000000000000000000000 abo#e; fall ()777777777777777777777 below; fall ()888888888888888888888 below; rise Answer: Q estion !tat s: "re#io s $dition )1%= @hen the )rice of a bond is _____ the e* ilibri m )rice, there is an e0cess _____ for (of) bonds and )rice will _____. ()aaaaaaaaaaaaaaaaaaaaaa below; demand; rise ()bbbbbbbbbbbbbbbbbbbbbb below; demand; fall ()cccccccccccccccccccccc below; s ))l7; fall ()dddddddddddddddddddddd abo#e; s ))l7; rise Answer: Q estion !tat s: "re#io s $dition )1&6 @hen the interest rate on a bond is abo#e the e* ilibri m interest rate, in the bond market there is e0cess _____ and the interest rate will _____. ()eeeeeeeeeeeeeeeeeeeeee demand; rise ()ffffffffffffffffffffff demand; fall ()gggggggggggggggggggggg s ))l7; fall ()hhhhhhhhhhhhhhhhhhhhhh s ))l7; rise Answer: Q estion !tat s: "re#io s $dition )1&1 @hen the interest rate on a bond is below the e* ilibri m interest rate, in the bond market there is e0cess _____ and the interest rate will _____. ()iiiiiiiiiiiiiiiiiiiiii demand; rise ()'''''''''''''''''''''' demand; fall ()kkkkkkkkkkkkkkkkkkkkkk s ))l7; fall ()llllllllllllllllllllll s ))l7; rise Answer: Q estion !tat s: "re#io s $dition )1&% @hen the interest rate on a bond is ______ the e* ilibri m interest rate, in the bond market there is e0cess _____ and the interest rate will _____. ()mmmmmmmmmmmmmmmmmmmmmm abo#e; demand; rise ()nnnnnnnnnnnnnnnnnnnnnn abo#e; demand; fall ()oooooooooooooooooooooo below; s ))l7; fall ())))))))))))))))))))))) abo#e; s ))l7; rise Answer: Q estion !tat s: "re#io s $dition

1/9,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)1&& @hen the interest rate on a bond is _____ the e* ilibri m interest rate, in the bond market there is e0cess _____ and the interest rate will _____. ()********************** below; demand; rise ()rrrrrrrrrrrrrrrrrrrrrr below; demand; fall ()ssssssssssssssssssssss below; s ))l7; fall ()tttttttttttttttttttttt abo#e; s ))l7; rise () below; s ))l7; rise Answer: Q estion !tat s: "re#io s $dition )1&( A sit ation in which the * antit7 of bonds s ))lied e0ceeds the * antit7 of bonds demanded is called a condition of e0cess s ))l7; beca se )eo)le want to sell _____ bonds than others want to b 7, the )rice of bonds will _____. ()###################### fewer; fall ()wwwwwwwwwwwwwwwwwwwwww fewer; rise ()0000000000000000000000 more; fall ()7777777777777777777777 more; rise Answer: Q estion !tat s: "re#io s $dition )1&/ If the )rice of bonds is set _____ the e* ilibri m )rice, the * antit7 of bonds demanded e0ceeds the * antit7 of bonds s ))lied, a condition called e0cess _____. ()8888888888888888888888 abo#e; demand ()aaaaaaaaaaaaaaaaaaaaaaa abo#e; s ))l7 ()bbbbbbbbbbbbbbbbbbbbbbb below; demand ()ccccccccccccccccccccccc below; s ))l7 Answer: Q estion !tat s: "re#io s $dition )1&2 If the )rice of bonds is _____ the e* ilibri m )rice, the * antit7 of bonds s ))lied e0ceeds the * antit7 of bonds demanded, a condition called e0cess _____. ()ddddddddddddddddddddddd abo#e; demand ()eeeeeeeeeeeeeeeeeeeeeee abo#e; s ))l7 ()fffffffffffffffffffffff below; demand ()ggggggggggggggggggggggg below; s ))l7 Answer: Q estion !tat s: "re#io s $dition )1&9 @hen the interest rate changes, ()hhhhhhhhhhhhhhhhhhhhhhh the demand c r#e for bonds shifts to the right. ()iiiiiiiiiiiiiiiiiiiiiii the demand c r#e for bonds shifts to the left. ()''''''''''''''''''''''' the s ))l7 c r#e for bonds shifts to the right. ()kkkkkkkkkkkkkkkkkkkkkkk the s ))l7 c r#e for bonds shifts to the left. ()lllllllllllllllllllllll none of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1/;

)1&; @hen the interest rate changes, ()mmmmmmmmmmmmmmmmmmmmmmm the demand c r#e for bonds shifts to the right. ()nnnnnnnnnnnnnnnnnnnnnnn the demand c r#e for bonds shifts to the left. ()ooooooooooooooooooooooo the s ))l7 c r#e for bonds shifts to the right. ()))))))))))))))))))))))) it is beca se either the demand or the s ))l7 c r#e has shifted. Answer: Q estion !tat s: "re#io s $dition )1&= @hen the interest rate rises, either the demand for bonds ______ or the s ))l7 of bonds _____. ()*********************** increases; increases ()rrrrrrrrrrrrrrrrrrrrrrr increases; decreases ()sssssssssssssssssssssss decreases; decreases ()ttttttttttttttttttttttt decreases; increases Answer: Q estion !tat s: "re#io s $dition )1(6 @hen the interest rate falls, either the demand for bonds ______ or the s ))l7 of bonds _____. () increases; increases ()####################### increases; decreases ()wwwwwwwwwwwwwwwwwwwwwww decreases; decreases ()00000000000000000000000 decreases; increases Answer: Q estion !tat s: "re#io s $dition )1(1 A decrease in the brokerage commissions in the ho sing market from 2 to /K of the sales )rice will shift the ________ c r#e for bonds to the _________. ()77777777777777777777777 demand; right ()88888888888888888888888 demand; left ()aaaaaaaaaaaaaaaaaaaaaaaa s ))l7; right ()bbbbbbbbbbbbbbbbbbbbbbbb s ))l7; left ()cccccccccccccccccccccccc does not affect the demand or s ))l7 of bonds Answer: Q estion !tat s: !t d7 ? ide )1(% @hen )eo)le re#ise )ward their e0)ectations of f t re interest rates, the _____ c r#e for bonds shifts to the _____. ()dddddddddddddddddddddddd demand; right ()eeeeeeeeeeeeeeeeeeeeeeee demand; left ()ffffffffffffffffffffffff s ))l7; left ()gggggggggggggggggggggggg s ))l7; right Answer: Q estion !tat s: "re#io s $dition

1/=,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)1(& @hen )eo)le e0)ect interest rates to rise in the f t re, the _____ c r#e for bonds shifts to the _____. ()hhhhhhhhhhhhhhhhhhhhhhhh demand; right ()iiiiiiiiiiiiiiiiiiiiiiii demand; left ()'''''''''''''''''''''''' s ))l7; left ()kkkkkkkkkkkkkkkkkkkkkkkk s ))l7; right Answer: Q estion !tat s: "re#io s $dition )1(( @hen )eo)le e0)ect interest rates to fall in the f t re, the _____ c r#e for bonds shifts to the _____. ()llllllllllllllllllllllll demand; right ()mmmmmmmmmmmmmmmmmmmmmmmm demand; left ()nnnnnnnnnnnnnnnnnnnnnnnn s ))l7; left ()oooooooooooooooooooooooo s ))l7; right Answer: Q estion !tat s: "re#io s $dition )1(/ If )eo)le e0)ect real estate )rices to increase significantl7, the _____ c r#e for bonds will shift to the _____. ())))))))))))))))))))))))) demand; right ()************************ demand; left ()rrrrrrrrrrrrrrrrrrrrrrrr s ))l7; left ()ssssssssssssssssssssssss s ))l7; right Answer: Q estion !tat s: "re#io s $dition )1(2 If )eo)le e0)ect real estate )rices to decrease significantl7, the _____ c r#e for bonds will shift to the _____. ()tttttttttttttttttttttttt demand; right () demand; left ()######################## s ))l7; left ()wwwwwwwwwwwwwwwwwwwwwwww s ))l7; right Answer: Q estion !tat s: "re#io s $dition )1(9 @hen stock )rices become more #olatile, the ______ c r#e for bonds shifts to the _____. ()000000000000000000000000 demand; right ()777777777777777777777777 demand; left ()888888888888888888888888 s ))l7; left ()aaaaaaaaaaaaaaaaaaaaaaaaa s ))l7; right Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates126

)1(; @hen stock )rices become less #olatile, the ______ c r#e for bonds shifts to the _____. ()bbbbbbbbbbbbbbbbbbbbbbbbb demand; right ()ccccccccccccccccccccccccc demand; left ()ddddddddddddddddddddddddd s ))l7; left ()eeeeeeeeeeeeeeeeeeeeeeeee s ))l7; right Answer: Q estion !tat s: "re#io s $dition )1(= @hen )rices in the art market become more ncertain, ()fffffffffffffffffffffffff the demand c r#e for bonds shifts to the left and the interest rate rises. ()ggggggggggggggggggggggggg the demand c r#e for bonds shifts to the left and the interest rate falls. ()hhhhhhhhhhhhhhhhhhhhhhhhh the demand c r#e for bonds shifts to the right and the interest rate rises. ()iiiiiiiiiiiiiiiiiiiiiiiii the s ))l7 c r#e for bonds shifts to the right and the interest rate falls. ()''''''''''''''''''''''''' none of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition )1/6 @hen )rices in the art market become more ncertain, ()kkkkkkkkkkkkkkkkkkkkkkkkk the demand c r#e for bonds shifts to the left and the interest rate rises. ()lllllllllllllllllllllllll the demand c r#e for bonds shifts to the left and the interest rate falls. ()mmmmmmmmmmmmmmmmmmmmmmmmm the demand c r#e for bonds shifts to the right and the interest rate falls. ()nnnnnnnnnnnnnnnnnnnnnnnnn the s ))l7 c r#e for bonds shifts to the right and the interest rate falls. Answer: Q estion !tat s: "re#io s $dition )1/1 @hen )rices in the art market become less ncertain, ()ooooooooooooooooooooooooo the demand c r#e for bonds shifts to the left and the interest rate falls. ()))))))))))))))))))))))))) the demand c r#e for bonds shifts to the right and the interest rate rises. ()************************* the s ))l7 c r#e for bonds shifts to the right and the interest rate falls. ()rrrrrrrrrrrrrrrrrrrrrrrrr none of the abo#e occ rs. Answer: Q estion !tat s: "re#io s $dition

121,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)1/% @hen )rices in the art market become less ncertain, ()sssssssssssssssssssssssss the demand c r#e for bonds shifts to the left and the interest rate rises. ()ttttttttttttttttttttttttt the demand c r#e for bonds shifts to the left and the interest rate falls. () the demand c r#e for bonds shifts to the right and the interest rate falls. ()######################### the s ))l7 c r#e for bonds shifts to the right and the interest rate falls. Answer: Q estion !tat s: "re#io s $dition )1/& @hen )rices in the stock market become more ncertain, the demand c r#e for bonds shifts to the _____ and the interest rate _____. ()wwwwwwwwwwwwwwwwwwwwwwwww right; rises ()0000000000000000000000000 right; falls ()7777777777777777777777777 left; falls ()8888888888888888888888888 left; rises Answer: Q estion !tat s: "re#io s $dition )1/( @hen )rices in the stock market become less ncertain, the demand c r#e for bonds shifts to the _____ and the interest rate _____. ()aaaaaaaaaaaaaaaaaaaaaaaaaa right; rises ()bbbbbbbbbbbbbbbbbbbbbbbbbb right; falls ()cccccccccccccccccccccccccc left; falls ()dddddddddddddddddddddddddd left; rises Answer: Q estion !tat s: "re#io s $dition )1// @hen the federal go#ernmentHs b dget deficit increases, the _____ c r#e for bonds shifts to the _____. ()eeeeeeeeeeeeeeeeeeeeeeeeee demand; right ()ffffffffffffffffffffffffff demand; left ()gggggggggggggggggggggggggg s ))l7; left ()hhhhhhhhhhhhhhhhhhhhhhhhhh s ))l7; right Answer: Q estion !tat s: "re#io s $dition )1/2 @hen the federal go#ernmentHs b dget deficit decreases, the _____ c r#e for bonds shifts to the _____. ()iiiiiiiiiiiiiiiiiiiiiiiiii demand; right ()'''''''''''''''''''''''''' demand; left ()kkkkkkkkkkkkkkkkkkkkkkkkkk s ))l7; left ()llllllllllllllllllllllllll s ))l7; right Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates12%

)1/9 @hen the e0)ected inflation rate increases, the demand for bonds _____, the s ))l7 of bonds _____, and the interest rate ______. ()mmmmmmmmmmmmmmmmmmmmmmmmmm increases; increases; rises ()nnnnnnnnnnnnnnnnnnnnnnnnnn decreases; decreases; falls ()oooooooooooooooooooooooooo increases; decreases; falls ())))))))))))))))))))))))))) decreases; increases; rises Answer: Q estion !tat s: "re#io s $dition )1/; @hen the e0)ected inflation rate decreases, the demand for bonds _____, the s ))l7 of bonds _____, and the interest rate ______. ()************************** increases; increases; rises ()rrrrrrrrrrrrrrrrrrrrrrrrrr decreases; decreases; falls ()ssssssssssssssssssssssssss increases; decreases; falls ()tttttttttttttttttttttttttt decreases; increases; rises Answer: Q estion !tat s: "re#io s $dition )1/= @hen a recession occ rs, normall7 the demand for bonds _____ and the s ))l7 of bonds _____. () increases; increases ()########################## increases; decreases ()wwwwwwwwwwwwwwwwwwwwwwwwww decreases; decreases ()00000000000000000000000000 decreases; increases Answer: Q estion !tat s: "re#io s $dition )126 @hen an econom7 grows o t of a recession, normall7 the demand for bonds _____ and the s ))l7 of bonds _____. ()77777777777777777777777777 increases; increases ()88888888888888888888888888 increases; decreases ()aaaaaaaaaaaaaaaaaaaaaaaaaaa decreases; decreases ()bbbbbbbbbbbbbbbbbbbbbbbbbbb decreases; increases Answer: Q estion !tat s: "re#io s $dition )121 @hen the econom7 sli)s into a recession, normall7 the demand for bonds _____, the s ))l7 of bonds _____, and the interest rate _____. ()ccccccccccccccccccccccccccc increases; increases; rises ()ddddddddddddddddddddddddddd decreases; decreases; falls ()eeeeeeeeeeeeeeeeeeeeeeeeeee increases; decreases; falls ()fffffffffffffffffffffffffff decreases; increases; rises Answer: Q estion !tat s: "re#io s $dition

12&,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)12% @hen the econom7 enters into a boom, normall7 the demand for bonds _____, the s ))l7 of bonds _____, and the interest rate _____. ()ggggggggggggggggggggggggggg increases; increases; rises ()hhhhhhhhhhhhhhhhhhhhhhhhhhh decreases; decreases; falls ()iiiiiiiiiiiiiiiiiiiiiiiiiii increases; decreases; rises ()''''''''''''''''''''''''''' decreases; increases; rises Answer: Q estion !tat s: "re#io s $dition )12& In a recession, bond demand shifts to the ________, bond s ))l7 shifts to the _______, and the interest rate _____. ()kkkkkkkkkkkkkkkkkkkkkkkkkkk right; right; rises ()lllllllllllllllllllllllllll right; left; falls ()mmmmmmmmmmmmmmmmmmmmmmmmmmm left; left; falls ()nnnnnnnnnnnnnnnnnnnnnnnnnnn left; right; rises ()ooooooooooooooooooooooooooo left; right; falls Answer: Q estion !tat s: !t d7 ? ide )12( In the 1==6s Ea)an had the lowest interest rates in the world d e to a combination of ()))))))))))))))))))))))))))) inflation and recession. ()*************************** deflation and e0)ansion. ()rrrrrrrrrrrrrrrrrrrrrrrrrrr inflation and e0)ansion. ()sssssssssssssssssssssssssss deflation and recession. ()ttttttttttttttttttttttttttt disinflation and e0)ansion. Answer: Q estion !tat s: +ew )12/ Ieflation ca ses the demand for bonds to ________, the s ))l7 of bonds to ______, and interest rates to_______. () increase; increase; increase ()########################### increase; decrease; decrease ()wwwwwwwwwwwwwwwwwwwwwwwwwww decrease; increase; increase ()000000000000000000000000000 decrease; decrease; increase ()777777777777777777777777777 decrease; decrease; decrease Answer: Q estion !tat s: +ew )122 Ieflation ca ses the demand for bonds to ________, the s ))l7 of bonds to ______, and bond )rices to_______. ()888888888888888888888888888 increase; increase; increase ()aaaaaaaaaaaaaaaaaaaaaaaaaaaa increase; decrease; increase ()bbbbbbbbbbbbbbbbbbbbbbbbbbbb decrease; increase; increase ()cccccccccccccccccccccccccccc decrease; decrease; increase ()dddddddddddddddddddddddddddd decrease; decrease; decrease Answer: Q estion !tat s: +ew

5ha)ter /<he 4eha#ior of Interest :ates12(

)129 Ieflation ca ses the _____ bonds to increase, the _____ bonds to decrease, and _____ to decrease. ()eeeeeeeeeeeeeeeeeeeeeeeeeeee s ))l7 of; demand for; bond )rices ()ffffffffffffffffffffffffffff s ))l7 of; demand for; interest rates ()gggggggggggggggggggggggggggg demand for; s ))l7 of; bond )rices ()hhhhhhhhhhhhhhhhhhhhhhhhhhhh demand for; s ))l7 of; interest rates ()iiiiiiiiiiiiiiiiiiiiiiiiiiii demand for; s ))l7 of; e0change rates Answer: Q estion !tat s: +ew )12; Ieflation ca ses the _____ bonds to increase, the _____ bonds to decrease, and _____ to increase. ()'''''''''''''''''''''''''''' s ))l7 of; demand for; bond )rices ()kkkkkkkkkkkkkkkkkkkkkkkkkkkk s ))l7 of; demand for; interest rates ()llllllllllllllllllllllllllll demand for; s ))l7 of; bond )rices ()mmmmmmmmmmmmmmmmmmmmmmmmmmmm demand for; s ))l7 of; interest rates ()nnnnnnnnnnnnnnnnnnnnnnnnnnnn demand for; s ))l7 of; e0change rates Answer: Q estion !tat s: +ew )12= A low sa#ings rate ca ses the _________ bonds to fall, and ______ to increase. ()oooooooooooooooooooooooooooo demand for; interest rates ())))))))))))))))))))))))))))) s ))l7 of; interest rates ()**************************** demand for; bond )rices ()rrrrrrrrrrrrrrrrrrrrrrrrrrrr s ))l7 of; bond )rices ()ssssssssssssssssssssssssssss s ))l7 of; e0change rates Answer: Q estion !tat s: +ew )196 A low sa#ings rate ca ses the _________ bonds to fall, and ______ to decrease. ()tttttttttttttttttttttttttttt demand for; interest rates () s ))l7 of; interest rates ()############################ demand for; bond )rices ()wwwwwwwwwwwwwwwwwwwwwwwwwwww s ))l7 of; bond )rices ()0000000000000000000000000000 s ))l7 of; e0change rates Answer: Q estion !tat s: +ew )191 A low sa#ings rate will ______ interest rates, and ________ in#estment in ca)ital goods ()7777777777777777777777777777 decrease; decrease ()8888888888888888888888888888 increase; decrease ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaa decrease; increase ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbb increase; increase ()ccccccccccccccccccccccccccccc decrease; not affect Answer: Q estion !tat s: +ew

12/,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

Figure 5-1 )19% In ,ig re /-1, the most likel7 ca se of the increase in the e* ilibri m interest rate from i 1 to i% is ()ddddddddddddddddddddddddddddd an increase in the )rice of bonds. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeee a decline in the )rice of bonds. ()fffffffffffffffffffffffffffff an increase in the e0)ected inflation rate. ()ggggggggggggggggggggggggggggg a decrease in the e0)ected inflation rate. Answer: Q estion !tat s: "re#io s $dition )19& In ,ig re /-1, the most likel7 ca se of the increase in the e* ilibri m interest rate from i 1 to i% is ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhh an increase in the e0)ected inflation rate. ()iiiiiiiiiiiiiiiiiiiiiiiiiiiii a decrease in the e0)ected inflation rate. ()''''''''''''''''''''''''''''' a shar) decline in the growth rate of the mone7 s ))l7. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkk a combination of both (a) and (c) abo#e. Answer: Q estion !tat s: "re#io s $dition )19( In ,ig re /-1, the most likel7 ca se of the increase in the e* ilibri m interest rate from i 1 to i% is ()lllllllllllllllllllllllllllll an e0)ected decrease in the go#ernment b dget deficit. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmm an e0)ected increase in the go#ernment b dget deficit. ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnn a shar) decline in the growth rate of the mone7 s ))l7. ()ooooooooooooooooooooooooooooo a combination of both (a) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )19/ In ,ig re /-1, an increase in the e0)ected inflation rate ca ses the ()))))))))))))))))))))))))))))) interest rate to increase from i1 to i%. ()***************************** interest rate to decrease from i% to i1. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrr demand c r#e for bonds to shift to the left. ()sssssssssssssssssssssssssssss both (a) and (c) of the abo#e. ()ttttttttttttttttttttttttttttt both (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates122

)192 In ,ig re /-1, an increase in the e0)ected inflation rate ca ses the () interest rate to increase from i1 to i%. ()############################# interest rate to decrease from i% to i1. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwww demand c r#e for bonds to shift to the right. ()00000000000000000000000000000 both (a) and (c) of the abo#e. ()77777777777777777777777777777 both (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )199 In ,ig re /-1, one factor that wo ld not ha#e ca sed the s ))l7 of bonds to increase (shift to the right) is ()88888888888888888888888888888 an increase in go#ernment b dget deficits. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaa an increase in e0)ected inflation. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbb a recession. ()cccccccccccccccccccccccccccccc a b siness c7cle e0)ansion. Answer: Q estion !tat s: "re#io s $dition )19; In ,ig re /-1, one factor that wo ld not ha#e ca sed the s ))l7 of bonds to increase (shift to the right) is ()dddddddddddddddddddddddddddddd a decrease in go#ernment b dget deficits. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeee an increase in e0)ected inflation. ()ffffffffffffffffffffffffffffff e0)ectations of more )rofitable in#estment o))ort nities. ()gggggggggggggggggggggggggggggg a b siness c7cle e0)ansion. Answer: Q estion !tat s: "re#io s $dition )19= In ,ig re /-1, one factor that wo ld not ha#e ca sed the demand for bonds to decrease (shift to the left) is ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhh an increase in the e0)ected ret rn on bonds relati#e to other assets. ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiii a decrease in the e0)ected ret rn on bonds relati#e to other assets. ()'''''''''''''''''''''''''''''' a decrease in wealth. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkk an increase in the riskiness of bonds relati#e to other assets. Answer: Q estion !tat s: "re#io s $dition )1;6 In ,ig re /-1, one factor that wo ld not ha#e ca sed the demand for bonds to decrease (shift to the left) is ()llllllllllllllllllllllllllllll a decrease in the e0)ected ret rn on bonds relati#e to other assets. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmm an increase in wealth. ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnn a decrease in wealth. ()oooooooooooooooooooooooooooooo an increase in the riskiness of bonds relati#e to other assets. Answer: Q estion !tat s: "re#io s $dition

129,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)1;1 In ,ig re /-1, factors that wo ld not ha#e ca sed the demand for bonds to decrease (shift to the left) incl de: ())))))))))))))))))))))))))))))) an increase in the e0)ected ret rn on bonds relati#e to other assets. ()****************************** a red ction in the riskiness of bonds relati#e to other assets. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrr a decrease in wealth. ()ssssssssssssssssssssssssssssss all of the abo#e. ()tttttttttttttttttttttttttttttt onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )1;% In ,ig re /-1, factors that co ld ca se the s ))l7 of bonds to increase (shift to the right) incl de: () an increase in go#ernment b dget deficits. ()############################## an increase in e0)ected inflation. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwww e0)ectations of more )rofitable in#estment o))ort nities. ()000000000000000000000000000000 all of the abo#e. ()777777777777777777777777777777 onl7 (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )1;& In ,ig re /-1, factors that co ld ca se the s ))l7 of bonds to shift to the right incl de: ()888888888888888888888888888888 a decrease in go#ernment b dget deficits. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa a decrease in e0)ected inflation. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb a recession. ()ccccccccccccccccccccccccccccccc a b siness c7cle e0)ansion. Answer: Q estion !tat s: "re#io s $dition )1;( In ,ig re /-1, factors that co ld ca se the s ))l7 of bonds to increase (shift to the right) incl de: ()ddddddddddddddddddddddddddddddd an increase in go#ernment b dget deficits. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeee a decrease in e0)ected inflation. ()fffffffffffffffffffffffffffffff e0)ectations of more )rofitable in#estment o))ort nities. ()ggggggggggggggggggggggggggggggg all of the abo#e. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh onl7 (a) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )1;/ In ,ig re /-1, factors that co ld ca se the s ))l7 of bonds to shift to the right incl de: ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiii a decrease in go#ernment b dget deficits. ()''''''''''''''''''''''''''''''' an increase in e0)ected inflation. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk a recession. ()lllllllllllllllllllllllllllllll e0)ectations of fewer )rofitable in#estment o))ort nities. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates12;

)1;2 In ,ig re /-1, one factor that wo ld not ha#e ca sed the demand for bonds to shift to the left is ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm a red ction in the riskiness of bonds relati#e to other assets. ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn an increase in the e0)ected ret rn on bonds relati#e to other assets. ()ooooooooooooooooooooooooooooooo a decrease in the e0)ected rate of inflation. ()))))))))))))))))))))))))))))))) e0)ectations of higher interest rates in the f t re. Answer: Q estion !tat s: "re#io s $dition )1;9 In ,ig re /-1, one factor that wo ld not ha#e ca sed the demand for bonds to shift to the left is ()******************************* an increase in the riskiness of bonds relati#e to other assets. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr a decrease in the e0)ected ret rn on bonds relati#e to other assets. ()sssssssssssssssssssssssssssssss an increase in the e0)ected rate of inflation. ()ttttttttttttttttttttttttttttttt e0)ectations of lower interest rates in the f t re. Answer: Q estion !tat s: "re#io s $dition )1;; In ,ig re /-1, factors that co ld ca se the demand for bonds to decrease (shift to the left) incl de: () an increase in the e0)ected ret rn on bonds relati#e to other assets. ()############################### a decrease in the e0)ected ret rn on bonds relati#e to other assets. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwww an increase in wealth. ()0000000000000000000000000000000 a red ction in the riskiness of bonds relati#e to other assets. Answer: Q estion !tat s: "re#io s $dition )1;= In ,ig re /-1, factors that co ld ca se the demand for bonds to decrease (shift to the left) incl de: ()7777777777777777777777777777777 an increase in the riskiness of bonds relati#e to other assets. ()8888888888888888888888888888888 a decrease in the e0)ected ret rn on bonds relati#e to other assets. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa an increase in wealth. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb all of the abo#e. ()cccccccccccccccccccccccccccccccc onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

12=,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)1=6 In ,ig re /-1, factors that co ld ca se the demand for bonds to decrease (shift to the left) incl de: ()dddddddddddddddddddddddddddddddd an increase in the riskiness of bonds relati#e to other assets. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee an increase in the e0)ected rate of inflation. ()ffffffffffffffffffffffffffffffff e0)ectations of higher interest rates in the f t re. ()gggggggggggggggggggggggggggggggg all of the abo#e. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )1=1 In ,ig re /-1, factors that co ld ca se the demand for bonds to decrease (shift to the left) incl de: ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii a decrease in the riskiness of bonds relati#e to other assets. ()'''''''''''''''''''''''''''''''' a decrease in the e0)ected rate of inflation. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk e0)ectations of higher interest rates in the f t re. ()llllllllllllllllllllllllllllllll all of the abo#e. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )1=% In ,ig re /-1, factors that co ld ca se the demand for bonds to shift to the left incl de: ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn e0)ectations of lower interest rates in the f t re. ()oooooooooooooooooooooooooooooooo an increase in the e0)ected ret rn on bonds relati#e to other assets. ())))))))))))))))))))))))))))))))) a decrease in wealth. ()******************************** a red ction in the riskiness of bonds relati#e to other assets. Answer: Q estion !tat s: "re#io s $dition )1=& In ,ig re /-1, the )rice of bonds wo ld fall from "1 to "% and the interest rate wo ld rise from i1 to i% if ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr inflation is e0)ected to increase in the f t re. ()ssssssssssssssssssssssssssssssss interest rates are e0)ected to fall in the f t re. ()tttttttttttttttttttttttttttttttt the e0)ected ret rn on bonds relati#e to other assets is e0)ected to increase in the f t re. () the riskiness of bonds falls relati#e to other assets. Answer: Q estion !tat s: "re#io s $dition )1=( In ,ig re /-1, shifts of both s ))l7 and demand wo ld increase the )rice of bonds from " % to "1 and the interest rate wo ld fall from i% to i1 if ()################################ interest rates are e0)ected to fall in the f t re. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww the e0)ected ret rn on bonds relati#e to other assets is e0)ected to increase in the f t re. ()00000000000000000000000000000000 inflation is e0)ected to decline in the f t re. ()77777777777777777777777777777777 the riskiness of bonds falls relati#e to other assets. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates196

)1=/ In ,ig re /-1, the increase in the interest rate from i 1 to i% d e to an increase in the e0)ected inflation rate is called the ()88888888888888888888888888888888 ,isher effect. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa li* idit7 effect. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb income effect. ()ccccccccccccccccccccccccccccccccc Je7nes effect. Answer: Q estion !tat s: "re#io s $dition

Figure 5-2 )1=2 In ,ig re /-%, one )ossible e0)lanation for the increase in the interest rate from i 1 to i% is ()ddddddddddddddddddddddddddddddddd an increase in the e0)ected inflation rate. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee a decrease in the e0)ected inflation rate. ()fffffffffffffffffffffffffffffffff an increase in economic growth. ()ggggggggggggggggggggggggggggggggg a decrease in economic growth. Answer: Q estion !tat s: "re#io s $dition )1=9 In ,ig re /-%, one factor that wo ld not ha#e ca sed the s ))l7 of bonds to shift to the right is ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh an increase in go#ernment b dget deficits. ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii an increase in e0)ected inflation. ()''''''''''''''''''''''''''''''''' a recession. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk a b siness c7cle e0)ansion. Answer: Q estion !tat s: "re#io s $dition )1=; In ,ig re /-%, one factor that wo ld not ha#e ca sed the demand for bonds to increase (shift to the right) is ()lllllllllllllllllllllllllllllllll an increase in the e0)ected ret rn on bonds relati#e to other assets. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm a decrease in the e0)ected ret rn on bonds relati#e to other assets. ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn an increase in wealth. ()ooooooooooooooooooooooooooooooooo a red ction in the riskiness of bonds relati#e to other assets. Answer: Q estion !tat s: "re#io s $dition

191,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)1== In ,ig re /-%, one factor that wo ld not ha#e ca sed the s ))l7 of bonds to shift to the right is ()))))))))))))))))))))))))))))))))) an increase in go#ernment b dget deficits. ()********************************* an increase in e0)ected inflation. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr an increase in e0)ected )rofitable in#estment o))ort nities. ()sssssssssssssssssssssssssssssssss a b siness c7cle contraction. Answer: Q estion !tat s: "re#io s $dition )%66 In ,ig re /-%, one factor that wo ld not ha#e ca sed the s ))l7 of bonds to increase is ()ttttttttttttttttttttttttttttttttt an increase in go#ernment b dget deficits. () a decrease in e0)ected inflation. ()################################# e0)ectations of more )rofitable in#estment o))ort nities. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww a b siness c7cle e0)ansion. Answer: Q estion !tat s: "re#io s $dition )%61 In ,ig re /-%, factors that co ld ca se the s ))l7 of bonds to increase (shift to the right) incl de: ()000000000000000000000000000000000 a decrease in go#ernment b dget deficits. ()777777777777777777777777777777777 a decrease in e0)ected inflation. ()888888888888888888888888888888888 e0)ectations of more )rofitable in#estment o))ort nities. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa all of the abo#e. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb onl7 (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%6% In ,ig re /-%, one factor that wo ld not ha#e ca sed the demand for bonds to increase (shift to the right) is ()cccccccccccccccccccccccccccccccccc a decrease in the e0)ected ret rn on bonds relati#e to other assets. ()dddddddddddddddddddddddddddddddddd a red ction in the riskiness of bonds relati#e to other assets. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee a decrease in the e0)ected rate of inflation. ()ffffffffffffffffffffffffffffffffff e0)ectations of lower interest rates in the f t re. Answer: Q estion !tat s: "re#io s $dition )%6& In ,ig re /-%, one factor that wo ld not ha#e ca sed the demand for bonds to shift to the right is ()gggggggggggggggggggggggggggggggggg a red ction in the riskiness of bonds relati#e to other assets. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh an increase in the e0)ected ret rn on bonds relati#e to other assets. ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii a decrease in the e0)ected rate of inflation. ()'''''''''''''''''''''''''''''''''' e0)ectations of higher interest rates in the f t re. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates19%

)%6( In ,ig re /-%, factors that co ld ca se the demand for bonds to increase incl de: ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk an increase in the e0)ected ret rn on bonds relati#e to other assets. ()llllllllllllllllllllllllllllllllll a decrease in the e0)ected ret rn on bonds relati#e to other assets. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm a red ction in the riskiness of bonds relati#e to other assets. ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn both (a) and (b) of the abo#e. ()oooooooooooooooooooooooooooooooooo both (a) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%6/ In ,ig re /-%, factors that co ld ca se the demand for bonds to increase incl de: ())))))))))))))))))))))))))))))))))) an increase in the riskiness of bonds relati#e to other assets. ()********************************** a decrease in the e0)ected ret rn on bonds relati#e to other assets. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr an increase in wealth. ()ssssssssssssssssssssssssssssssssss all of the abo#e. ()tttttttttttttttttttttttttttttttttt onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%62 In ,ig re /-%, factors that co ld ca se the demand for bonds to shift to the right incl de: () an increase in the riskiness of bonds relati#e to other assets. ()################################## an increase in the e0)ected rate of inflation. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww e0)ectations of lower interest rates in the f t re. ()0000000000000000000000000000000000 all of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%69 In ,ig re /-%, factors that co ld ca se the demand for bonds to shift to the right incl de: ()7777777777777777777777777777777777 a decrease in the riskiness of bonds relati#e to other assets. ()8888888888888888888888888888888888 a decrease in the e0)ected rate of inflation. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa e0)ectations of higher interest rates in the f t re. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb all of the abo#e. ()ccccccccccccccccccccccccccccccccccc onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

19&,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)%6; In ,ig re /-%, factors that co ld ca se the demand for bonds to shift to the right incl de: ()ddddddddddddddddddddddddddddddddddd e0)ectations of lower interest rates in the f t re. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee an increase in the e0)ected ret rn on bonds relati#e to other assets. ()fffffffffffffffffffffffffffffffffff a red ction in the riskiness of bonds relati#e to other assets. ()ggggggggggggggggggggggggggggggggggg all of the abo#e. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%6= @hen com)aring the 1oanable , nds and 1i* idit7 "reference ,rameworks of interest rate determination, which of the following are tr eL ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii <he loanable f nds framework is easier to se when anal78ing the effects from changes in e0)ected inflation. ()''''''''''''''''''''''''''''''''''' <he li* idit7 )reference framework )ro#ides a sim)ler anal7sis of the effects from changes in income, the )rice le#el, and the s ))l7 of mone7. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk In most instances, the two a))roaches to interest rate determination 7ield the same )redictions. ()lllllllllllllllllllllllllllllllllll All of the abo#e are tr e. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm 3nl7 (a) and (b) of the abo#e are tr e. Answer: Q estion !tat s: "re#io s $dition )%16 @hen com)aring the 1oanable , nds and 1i* idit7 "reference ,rameworks of interest rate determination, which of the following are tr eL ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn <he li* idit7 )reference framework is easier to se when anal78ing the effects from changes in e0)ected inflation. ()ooooooooooooooooooooooooooooooooooo <he loanable f nds framework )ro#ides a sim)ler anal7sis of the effects from changes in income, the )rice le#el, and the s ))l7 of mone7. ()))))))))))))))))))))))))))))))))))) In most instances, the two a))roaches to interest rate determination 7ield the same )redictions. ()*********************************** All of the abo#e are tr e. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr 3nl7 (a) and (b) of the abo#e are tr e. Answer: Q estion !tat s: "re#io s $dition )%11 In his 1i* idit7 "reference ,ramework, Je7nes ass med that mone7 has a 8ero rate of ret rn; th s, ()sssssssssssssssssssssssssssssssssss when interest rates rise, the e0)ected ret rn on mone7 falls relati#e to the e0)ected ret rn on bonds, ca sing the demand for mone7 to fall. ()ttttttttttttttttttttttttttttttttttt when interest rates rise, the e0)ected ret rn on mone7 falls relati#e to the e0)ected ret rn on bonds, ca sing the demand for mone7 to rise. () when interest rates fall, the e0)ected ret rn on mone7 falls relati#e to the e0)ected ret rn on bonds, ca sing the demand for mone7 to fall. ()################################### when interest rates fall, the e0)ected ret rn on mone7 falls relati#e to the e0)ected ret rn on bonds, ca sing the demand for mone7 to rise. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates19(

)%1% <he loanable f nds framework is easier to se when anal78ing the effects of changes in _____, while the li* idit7 )reference framework )ro#ides a sim)ler anal7sis of the effects from changes in income, the )rice le#el, and the s ))l7 of _____. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww e0)ected inflation; bonds ()00000000000000000000000000000000000 e0)ected inflation; mone7 ()77777777777777777777777777777777777 go#ernment b dget deficits; bonds ()88888888888888888888888888888888888 go#ernment b dget deficits; mone7 Answer: Q estion !tat s: "re#io s $dition )%1& In Je7nesHs li* idit7 )reference framework, indi#id als are ass med to hold their wealth in two forms: ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa real assets and financial assets. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb stocks and bonds. ()cccccccccccccccccccccccccccccccccccc mone7 and bonds. ()dddddddddddddddddddddddddddddddddddd mone7 and gold. Answer: Q estion !tat s: "re#io s $dition )%1( In Je7nesHs li* idit7 )reference framework, as the e0)ected ret rn on bonds increases (holding e#er7thing else nchanged), the e0)ected ret rn on mone7 _____, ca sing the demand for _____ to fall. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee falls; bonds ()ffffffffffffffffffffffffffffffffffff falls; mone7 ()gggggggggggggggggggggggggggggggggggg rises; bonds ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh rises; mone7 Answer: Q estion !tat s: "re#io s $dition )%1/ In Je7nesHs li* idit7 )reference framework, ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii the demand for bonds m st e* al the s ))l7 of mone7. ()'''''''''''''''''''''''''''''''''''' the demand for mone7 m st e* al the s ))l7 of bonds. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk an e0cess s ))l7 of bonds im)lies an e0cess s ))l7 of mone7. ()llllllllllllllllllllllllllllllllllll all of the abo#e. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm none of the abo#e. Answer: Q estion !tat s: "re#io s $dition

19/,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)%12 In Je7nesHs li* idit7 )reference framework, ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn mone7. ()oooooooooooooooooooooooooooooooooooo bonds. ())))))))))))))))))))))))))))))))))))) demand for mone7. ()************************************ demand for mone7. Answer: Q estion !tat s: "re#io s $dition

the demand for bonds m st e* al the s ))l7 of the demand for mone7 m st e* al the s ))l7 of an e0cess demand of bonds im)lies an e0cess an e0cess s ))l7 of bonds im)lies an e0cess

)%19 If there is e0cess demand for mone7, there is ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr e0cess demand for bonds. ()ssssssssssssssssssssssssssssssssssss e* ilibri m in the bond market. ()tttttttttttttttttttttttttttttttttttt e0cess s ))l7 of bonds. () too m ch mone7. ()#################################### too few bonds. Answer: Q estion !tat s: +ew )%1; An e0cess demand for bonds im)lies ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww e0cess demand for mone7. ()000000000000000000000000000000000000 e* ilibri m in the mone7 market. ()777777777777777777777777777777777777 a shortage of c rrenc7. ()888888888888888888888888888888888888 a s r)l s of bonds. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa e0cess s ))l7 of mone7. Answer: Q estion !tat s: +ew )%1= <he o))ort nit7 cost of holding mone7 is ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb the le#el of income. ()ccccccccccccccccccccccccccccccccccccc the )rice le#el. ()ddddddddddddddddddddddddddddddddddddd the interest rate. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee all of the abo#e. ()fffffffffffffffffffffffffffffffffffff onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: +ew )%%6 An increase in the interest rate ()ggggggggggggggggggggggggggggggggggggg increases the demand for mone7. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh increases the * antit7 of mone7 demanded. ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii decreases the demand for mone7. ()''''''''''''''''''''''''''''''''''''' decreases the * antit7 of mone7 demanded. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk has no effect on the * antit7 of mone7 demanded. Answer: Q estion !tat s: +ew

5ha)ter /<he 4eha#ior of Interest :ates192

)%%1 A decrease in the interest rate ()lllllllllllllllllllllllllllllllllllll increases the demand for mone7. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm increases the * antit7 of mone7 demanded. ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn decreases the demand for mone7. ()ooooooooooooooooooooooooooooooooooooo decreases the * antit7 of mone7 demanded. ()))))))))))))))))))))))))))))))))))))) has no effect on the * antit7 of mone7 demanded. Answer: Q estion !tat s: +ew )%%% If there is an e0cess s ))l7 of mone7 ()************************************* indi#id als sell bonds, ca sing the interest rate to rise. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr indi#id als sell bonds, ca sing the interest rate to fall. ()sssssssssssssssssssssssssssssssssssss indi#id als b 7 bonds, ca sing interest rates to fall. ()ttttttttttttttttttttttttttttttttttttt indi#id als b 7 bonds, ca sing interest rates to rise. () indi#id als b 7 bonds, ca sing bond )rices to fall. Answer: Q estion !tat s: +ew )%%& If there is an e0cess demand for mone7 ()##################################### indi#id als sell bonds, ca sing the interest rate to rise. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww indi#id als sell bonds, ca sing the interest rate to fall. ()0000000000000000000000000000000000000 indi#id als b 7 bonds, ca sing interest rates to fall. ()7777777777777777777777777777777777777 indi#id als b 7 bonds, ca sing interest rates to rise. ()8888888888888888888888888888888888888 indi#id als b 7 bonds, ca sing bond )rices to fall. Answer: Q estion !tat s: +ew )%%( A higher le#el of income ca ses the demand for mone7 to _____ and the demand c r#e for mone7 to shift to the _____. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa decrease; right ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb decrease; left ()cccccccccccccccccccccccccccccccccccccc increase; right ()dddddddddddddddddddddddddddddddddddddd increase; left Answer: Q estion !tat s: "re#io s $dition

199,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)%%/ A lower le#el of income ca ses the demand for mone7 to _____ and the demand c r#e for mone7 to shift to the _____. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee decrease; right ()ffffffffffffffffffffffffffffffffffffff decrease; left ()gggggggggggggggggggggggggggggggggggggg increase; right ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh increase; left Answer: Q estion !tat s: "re#io s $dition )%%2 A higher le#el of income ca ses the demand for mone7 to _____ and the interest rate to _____. ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii decrease; decrease ()'''''''''''''''''''''''''''''''''''''' decrease; increase ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk increase; decrease ()llllllllllllllllllllllllllllllllllllll increase; increase Answer: Q estion !tat s: "re#io s $dition )%%9 A lower le#el of income ca ses the demand for mone7 to _____ and the interest rate to _____. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmdecrease; decrease ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn decrease; increase ()oooooooooooooooooooooooooooooooooooooo increase; decrease ())))))))))))))))))))))))))))))))))))))) increase; increase Answer: Q estion !tat s: "re#io s $dition )%%; @hen real income falls, the demand c r#e for mone7 shifts to the _____ and the interest rate _____. ()************************************** right; rises ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr right; fall ()ssssssssssssssssssssssssssssssssssssss left; falls ()tttttttttttttttttttttttttttttttttttttt left; rises Answer: Q estion !tat s: "re#io s $dition )%%= @hen real income increases, the demand c r#e for mone7 shifts to the _____ and the interest rate _____. () right; rises ()###################################### right; fall ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww left; falls ()00000000000000000000000000000000000000 left; rises Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates19;

)%&6 @hen real income _____, the demand c r#e for mone7 shifts to the _____ and the interest rate _____. ()77777777777777777777777777777777777777 falls; left; falls ()88888888888888888888888888888888888888 falls; right; falls ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa falls; left; rises ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb rises; left; rises ()ccccccccccccccccccccccccccccccccccccccc rises; right; falls Answer: Q estion !tat s: "re#io s $dition )%&1 @hen real income _____, the demand c r#e for mone7 shifts to the _____ and the interest rate _____. ()ddddddddddddddddddddddddddddddddddddddd falls; right; rises ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee falls; right; falls ()fffffffffffffffffffffffffffffffffffffff falls; left; rises ()ggggggggggggggggggggggggggggggggggggggg rises; left; rises ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh rises; right; rises Answer: Q estion !tat s: "re#io s $dition )%&% In the Je7nesian li* idit7 )reference framework, a higher le#el of income ca ses the demand for mone7 to _____ and the demand c r#e to shift to the _____. ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii increase; left ()''''''''''''''''''''''''''''''''''''''' increase; right ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk decrease; left ()lllllllllllllllllllllllllllllllllllllll decrease; right Answer: Q estion !tat s: "re#io s $dition )%&& In the Je7nesian li* idit7 )reference framework, a lower le#el of income ca ses the demand for mone7 to _____ and the demand c r#e to shift to the _____. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm increase; left ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn increase; right ()ooooooooooooooooooooooooooooooooooooooo decrease; left ()))))))))))))))))))))))))))))))))))))))) decrease; right Answer: Q estion !tat s: "re#io s $dition )%&( In the Je7nesian li* idit7 )reference framework, when income is _____ d ring a b siness c7cle e0)ansion, interest rates will _____. ()*************************************** rising; rise ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr rising; fall ()sssssssssssssssssssssssssssssssssssssss falling; rise ()ttttttttttttttttttttttttttttttttttttttt falling; fall Answer: Q estion !tat s: "re#io s $dition

19=,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)%&/ In the Je7nesian li* idit7 )reference model, a b siness c7cle _________ ca ses income to ________ and interest rates to ________. () e0)ansion; decrease; decrease ()####################################### e0)ansion; increase; decrease ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww contraction; increase; increase ()000000000000000000000000000000000000000 contraction; decrease; decrease ()777777777777777777777777777777777777777 contraction; decrease; increase Answer: Q estion !tat s: !t d7 ? ide )%&2 In the Je7nesian li* idit7 )reference framework, a rise in the )rice le#el ca ses the demand for mone7 to _____ and the demand c r#e to shift to the _____. ()888888888888888888888888888888888888888 increase; left ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa increase; right ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb decrease; left ()cccccccccccccccccccccccccccccccccccccccc decrease; right Answer: Q estion !tat s: "re#io s $dition )%&9 In the Je7nesian li* idit7 )reference framework, a decline in the )rice le#el ca ses the demand for mone7 to _____ and the demand c r#e to shift to the _____. ()dddddddddddddddddddddddddddddddddddddddd increase; left ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee increase; right ()ffffffffffffffffffffffffffffffffffffffff decrease; left ()gggggggggggggggggggggggggggggggggggggggg decrease; right Answer: Q estion !tat s: "re#io s $dition )%&; @hen the )rice le#el _____, the demand c r#e for mone7 shifts to the _____ and the interest rate _____. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh falls; left; falls ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii falls; right; falls ()'''''''''''''''''''''''''''''''''''''''' falls; left; rises ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk rises; right; rises ()llllllllllllllllllllllllllllllllllllllll rises; right; falls Answer: Q estion !tat s: "re#io s $dition )%&= @hen the )rice le#el _____, the demand c r#e for mone7 shifts to the _____ and the interest rate _____. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm falls; left; rises ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn falls; right; falls ()oooooooooooooooooooooooooooooooooooooooo falls; left; falls ())))))))))))))))))))))))))))))))))))))))) rises; right; rises ()**************************************** rises; right; falls Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1;6

)%(6 @hen the )rice le#el rises, the demand c r#e for mone7 shifts to the _____ and the interest rate _____. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr right; rises ()ssssssssssssssssssssssssssssssssssssssss right; falls ()tttttttttttttttttttttttttttttttttttttttt left; falls () left; rises Answer: Q estion !tat s: "re#io s $dition )%(1 @hen the )rice le#el falls, the demand c r#e for mone7 shifts to the _____ and the interest rate _____. ()######################################## right; rises ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww right; falls ()0000000000000000000000000000000000000000 left; falls ()7777777777777777777777777777777777777777 left; rises Answer: Q estion !tat s: "re#io s $dition )%(% A rise in the )rice le#el ca ses the demand for mone7 to _____ and the interest rate to _____. ()8888888888888888888888888888888888888888 decrease; decrease ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa decrease; increase ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb increase; decrease ()ccccccccccccccccccccccccccccccccccccccccc increase; increase Answer: Q estion !tat s: "re#io s $dition )%(& A decline in the )rice le#el ca ses the demand for mone7 to _____ and the interest rate to _____. ()ddddddddddddddddddddddddddddddddddddddddd decrease; decrease ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee decrease; increase ()fffffffffffffffffffffffffffffffffffffffff increase; decrease ()ggggggggggggggggggggggggggggggggggggggggg increase; increase Answer: Q estion !tat s: "re#io s $dition )%(( A rise in the )rice le#el ca ses the demand for mone7 to ____ and the demand c r#e to shift to the ____. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh decrease; right ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii decrease; left ()''''''''''''''''''''''''''''''''''''''''' increase; right ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk increase; left Answer: Q estion !tat s: "re#io s $dition )%(/ A decline in the )rice le#el ca ses the demand for mone7 to ____ and the demand c r#e to shift to the ____. ()lllllllllllllllllllllllllllllllllllllllll decrease; right ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm decrease; left ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn increase; right ()ooooooooooooooooooooooooooooooooooooooooo increase; left

1;1,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

Answer: Q estion !tat s: "re#io s $dition )%(2 A decline in the e0)ected inflation rate ca ses the demand for mone7 to _____ and the demand c r#e to shift to the _____. ()))))))))))))))))))))))))))))))))))))))))) decrease; right ()***************************************** decrease; left ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr increase; right ()sssssssssssssssssssssssssssssssssssssssss increase; left Answer: Q estion !tat s: "re#io s $dition )%(9 In the li* idit7 )reference framework, a one-time increase in the mone7 s ))l7 res lts in a )rice le#el effect. <he ma0im m im)act of the )rice le#el effect on interest rates occ rs ()ttttttttttttttttttttttttttttttttttttttttt at the moment the )rice le#el hits its )eak (sto)s rising) beca se both the )rice le#el and e0)ected inflation effects are at work. () immediatel7 after the )rice le#el begins to rise, beca se both the )rice le#el and e0)ected inflation effects are at work. ()######################################### at the moment the e0)ected inflation rate hits its )eak. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww at the moment the inflation rate hits it )eak. ()00000000000000000000000000000000000000000 at the moment inflation begins to increase. Answer: Q estion !tat s: !t d7 ? ide )%(; In the li* idit7 )reference framework, a one-time increase in the mone7 s ))l7 has different )rice le#el and e0)ected inflation effects. <he difference is ()77777777777777777777777777777777777777777 the increase in the interest rate ca sed b7 the rise in the )rice le#el remains once the )rice le#el has sto))ed rising, b t the increase in the interest rate ca sed b7 e0)ected inflation will be re#ersed once the )rice le#el sto)s rising. ()88888888888888888888888888888888888888888 the increase in the interest rate ca sed b7 the rise in the e0)ected inflation rate remains once the )rice le#el has sto))ed rising, b t the increase in the interest rate ca sed b7 the rise in the )rice le#el will be re#ersed once the )rice le#el sto)s rising. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa once the )rice le#el sto)s rising, the interest rate declines beca se of the )rice le#el effect, b t the e0)ected inflation effect remains after the )rice le#el has sto))ed rising. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb once the )rice le#el sto)s rising, the interest rate contin es to increase beca se of the e0)ected inflation effect. ()cccccccccccccccccccccccccccccccccccccccccc there is no difference, as both effects ca se the interest rate to rise. Answer: Q estion !tat s: !t d7 ? ide

5ha)ter /<he 4eha#ior of Interest :ates1;%

)%(= Interest rates increased contin o sl7 d ring the 1=96s. <he most likel7 e0)lanation is ()dddddddddddddddddddddddddddddddddddddddddd banking fail res that red ced the mone7 s ))l7. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee a rise in the le#el of income. ()ffffffffffffffffffffffffffffffffffffffffff the re)eated bo ts of recession and e0)ansion. ()gggggggggggggggggggggggggggggggggggggggggg increasing e0)ected rates of inflation. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh an increase in the )rice le#el. Answer: Q estion !tat s: !t d7 ? ide )%/6 Dolding e#er7thing else e* al, an increase in the mone7 s ))l7 ca ses ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii interest rates to decline initiall7. ()'''''''''''''''''''''''''''''''''''''''''' interest rates to increase initiall7. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk bond )rices to decline initiall7. ()llllllllllllllllllllllllllllllllllllllllll both (a) and (c) of the abo#e. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm both (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%/1 Dolding e#er7thing else e* al, an increase in the mone7 s ))l7 ca ses ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn interest rates to decline initiall7. ()oooooooooooooooooooooooooooooooooooooooooo interest rates to increase initiall7. ())))))))))))))))))))))))))))))))))))))))))) bond )rices to increase initiall7. ()****************************************** both (a) and (c) of the abo#e. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr both (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%/% Dolding e#er7thing else e* al, a decrease in the mone7 s ))l7 ca ses ()ssssssssssssssssssssssssssssssssssssssssss interest rates to decline initiall7. ()tttttttttttttttttttttttttttttttttttttttttt interest rates to increase initiall7. () bond )rices to increase initiall7. ()########################################## both (a) and (c) of the abo#e. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww both (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%/& Dolding e#er7thing else e* al, a decrease in the mone7 s ))l7 ca ses ()000000000000000000000000000000000000000000 interest rates to decline initiall7. ()777777777777777777777777777777777777777777 interest rates to increase initiall7. ()888888888888888888888888888888888888888888 bond )rices to decrease initiall7. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa both (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

1;&,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)%/( @hen the ,ed decreases the mone7 stock, the mone7 s ))l7 c r#e shifts to the _____ and the interest rate _____. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb right; rises ()ccccccccccccccccccccccccccccccccccccccccccc right; falls ()ddddddddddddddddddddddddddddddddddddddddddd left; falls ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee left; rises Answer: Q estion !tat s: "re#io s $dition )%// @hen the ,ed increases the mone7 stock, the mone7 s ))l7 c r#e shifts to the _____ and the interest rate _____. ()fffffffffffffffffffffffffffffffffffffffffff right; rises ()ggggggggggggggggggggggggggggggggggggggggggg right; falls ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh left; falls ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii left; rises Answer: Q estion !tat s: "re#io s $dition )%/2 @hen the ,ed ____ the mone7 stock, the mone7 s ))l7 c r#e shifts to the ____ and the interest rate ____ ()''''''''''''''''''''''''''''''''''''''''''' decreases; right; rises ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk increases; right; rises ()lllllllllllllllllllllllllllllllllllllllllll decreases; left; falls ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm s; left; rises ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn decreases; left; rises Answer: Q estion !tat s: "re#io s $dition )%/9 @hen the ,ed increases the mone7 stock, the mone7 s ))l7 c r#e shifts to the _____ and the interest rate _____. ()ooooooooooooooooooooooooooooooooooooooooooo right; rises ()))))))))))))))))))))))))))))))))))))))))))) right; falls ()******************************************* left; falls ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr left; rises Answer: Q estion !tat s: "re#io s $dition )%/; @hen the ,ed _____ the mone7 stock, the mone7 s ))l7 c r#e shifts to the _____ and the interest rate _____. ()sssssssssssssssssssssssssssssssssssssssssss decreases; right; rises ()ttttttttttttttttttttttttttttttttttttttttttt increases; right; falls () decreases; left; falls ()########################################### increases; left; rises ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww decreases; right; falls Answer: Q estion !tat s: "re#io s $dition

increase

5ha)ter /<he 4eha#ior of Interest :ates1;(

)%/= @hen the )rice le#el falls, the ________ c r#e for nominal mone7 ________, and interest rates _______. ()0000000000000000000000000000000000000000000 demand; decreases; falls ()7777777777777777777777777777777777777777777 demand; increases; rises ()8888888888888888888888888888888888888888888 s ))l7; increases; rises ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa s ))l7; decreases; falls ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb s ))l7; increases; falls Answer: Q estion !tat s: !t d7 ? ide )%26 @hen the interest rate is abo#e the e* ilibri m interest rate, there is an e0cess _____ for (of) mone7 and the interest rate will _____. ()cccccccccccccccccccccccccccccccccccccccccccc demand; rise ()dddddddddddddddddddddddddddddddddddddddddddd demand; fall ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee s ))l7; fall ()ffffffffffffffffffffffffffffffffffffffffffff s ))l7; rise Answer: Q estion !tat s: "re#io s $dition )%21 In the market for mone7, an interest rate below e* ilibri m res lts in an e0cess _____ for (of) mone7 and the interest rate will _____. ()gggggggggggggggggggggggggggggggggggggggggggg demand; rise ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh demand; fall ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii s ))l7; fall ()'''''''''''''''''''''''''''''''''''''''''''' s ))l7; rise ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk cannot be determined Answer: Q estion !tat s: !t d7 ? ide )%2% A(n) ______ in the mone7 s ))l7 creates e0cess ______ of (for) mone7, ca sing interest rates to ______. ()llllllllllllllllllllllllllllllllllllllllllll increase; demand; rise ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm increase; s ))l7; fall ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn increase; s ))l7; rise ()oooooooooooooooooooooooooooooooooooooooooooo decrease; s ))l7; fall ())))))))))))))))))))))))))))))))))))))))))))) decrease; demand; fall Answer: Q estion !tat s: +ew )%2& A(n) ______ in the mone7 s ))l7 creates e0cess ______ of (for) mone7, ca sing interest rates to ______. ()******************************************** increase; demand; rise ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr increase; demand; fall ()ssssssssssssssssssssssssssssssssssssssssssss increase; s ))l7; rise ()tttttttttttttttttttttttttttttttttttttttttttt decrease; s ))l7; fall () decrease; demand; rise

1;/,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

Answer: Q estion !tat s: +ew )%2( A(n) ______ in the mone7 s ))l7 creates e0cess demand for _______, ca sing interest rates to _______. ()############################################ increase; mone7; rise ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww increase; bonds; fall ()00000000000000000000000000000000000000000000 decrease; bonds; rise ()77777777777777777777777777777777777777777777 decrease; bonds; fall ()88888888888888888888888888888888888888888888 decrease; mone7; fall Answer: Q estion !tat s: +ew

Figure 5-3 )%2/ In ,ig re /-&, one factor not res)onsible for the decline in the demand for mone7 is ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa a decline the )rice le#el. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb a decline in income. ()ccccccccccccccccccccccccccccccccccccccccccccc an increase in income. ()ddddddddddddddddddddddddddddddddddddddddddddd a decline in the e0)ected inflation rate. Answer: Q estion !tat s: "re#io s $dition )%22 In ,ig re /-&, one factor not res)onsible for the decline in the interest rate is ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee a decline the )rice le#el. ()fffffffffffffffffffffffffffffffffffffffffffff a decline in income. ()ggggggggggggggggggggggggggggggggggggggggggggg an increase in income. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh a decline in the e0)ected inflation rate. Answer: Q estion !tat s: "re#io s $dition )%29 In ,ig re /-&, one factor not res)onsible for the decline in the interest rate is ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii a decline the )rice le#el. ()''''''''''''''''''''''''''''''''''''''''''''' an increase in the mone7 s ))l7. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk a decline in income. ()lllllllllllllllllllllllllllllllllllllllllllll a decline in the e0)ected inflation rate.

5ha)ter /<he 4eha#ior of Interest :ates1;2

Answer: Q estion !tat s: "re#io s $dition )%2; In ,ig re /-&, the increase in the interest rate from i % to i1 can be e0)lained b7 ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm a decrease in mone7 growth. ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn a decline in the e0)ected )rice le#el. ()ooooooooooooooooooooooooooooooooooooooooooooo an increase in income. ()))))))))))))))))))))))))))))))))))))))))))))) all of the abo#e. ()********************************************* onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%2= In ,ig re /-&, the increase in the interest rate from i % to i1 can be e0)lained b7 ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr a decrease in mone7 growth. ()sssssssssssssssssssssssssssssssssssssssssssss an increase in the e0)ected )rice le#el. ()ttttttttttttttttttttttttttttttttttttttttttttt an increase in income. () both (a) and (c) of the abo#e. ()############################################# both (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%96 In ,ig re /-&, the decrease in the interest rate from i 1 to i% can be e0)lained b7 ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww a decrease in income. ()000000000000000000000000000000000000000000000 an increase in the e0)ected )rice le#el. ()777777777777777777777777777777777777777777777 a decrease in mone7 growth. ()888888888888888888888888888888888888888888888 onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%91 In ,ig re /-&, the decline in the interest rate from i1 to i% can be e0)lained b7 ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa a decrease in income. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbba decrease in the e0)ected )rice le#el. ()cccccccccccccccccccccccccccccccccccccccccccccc an increase in mone7 growth. ()ddddddddddddddddddddddddddddddddddddddddddddddboth (a) and (b) of the abo#e. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee both (a) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition

1;9,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

Figure 5-4 )%9% In ,ig re /-(, the factor res)onsible for the decline in the interest rate is ()ffffffffffffffffffffffffffffffffffffffffffffff a decline the )rice le#el. ()gggggggggggggggggggggggggggggggggggggggggggggga decline in income. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhan increase in the mone7 s ))l7. ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii a decline in the e0)ected inflation rate. Answer: Q estion !tat s: "re#io s $dition )%9& In ,ig re /-(, the decrease in the interest rate from i 1 to i% can be e0)lained b7 ()'''''''''''''''''''''''''''''''''''''''''''''' a decrease in mone7 growth. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkan increase in mone7 growth. ()llllllllllllllllllllllllllllllllllllllllllllll a decline in the e0)ected )rice le#el. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm onl7 (a) and (b) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%9( In ,ig re /-(, the increase in the interest rate from i % to i1 can be e0)lained b7 ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnna decrease in mone7 growth. ()ooooooooooooooooooooooooooooooooooooooooooooooan increase in the e0)ected )rice le#el. ()))))))))))))))))))))))))))))))))))))))))))))))an increase in income. ()**********************************************both (a) and (c) of the abo#e. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr both (b) and (c) of the abo#e. Answer: Q estion !tat s: "re#io s $dition )%9/ @hen the growth rate of the mone7 s ))l7 increases, interest rates end ) being )ermanentl7 higher if ()ssssssssssssssssssssssssssssssssssssssssssssss the li* idit7 effect is larger than the other effects. ()tttttttttttttttttttttttttttttttttttttttttttttt there is fast ad' stment of e0)ected inflation. () there is slow ad' stment of e0)ected inflation. ()##############################################the e0)ected inflation effect is larger than the li* idit7 effect. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1;;

)%92 @hen the growth rate of the mone7 s ))l7 increases, interest rates end ) being )ermanentl7 lower if ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww the li* idit7 effect is larger than the other effects. ()0000000000000000000000000000000000000000000000there is fast ad' stment of e0)ected inflation. ()7777777777777777777777777777777777777777777777there is slow ad' stment of e0)ected inflation. ()8888888888888888888888888888888888888888888888 the e0)ected inflation effect is larger than the li* idit7 effect. Answer: Q estion !tat s: "re#io s $dition )%99 @hen the growth rate of the mone7 s ))l7 decreases, interest rates end ) being )ermanentl7 lower if ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa the li* idit7 effect is larger than the other effects. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb there is fast ad' stment of e0)ected inflation. ()ccccccccccccccccccccccccccccccccccccccccccccccc there is slow ad' stment of e0)ected inflation. ()ddddddddddddddddddddddddddddddddddddddddddddddd the e0)ected inflation effect is larger than the li* idit7 effect. Answer: Q estion !tat s: "re#io s $dition )%9; @hen the growth rate of the mone7 s ))l7 decreases, interest rates end ) being )ermanentl7 higher if ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee the li* idit7 effect is larger than the other effects. ()fffffffffffffffffffffffffffffffffffffffffffffff there is fast ad' stment of e0)ected inflation. ()ggggggggggggggggggggggggggggggggggggggggggggggg there is slow ad' stment of e0)ected inflation. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh the e0)ected inflation effect is larger than the li* idit7 effect. Answer: Q estion !tat s: "re#io s $dition )%9= @hen the growth rate of the mone7 s ))l7 is decreased, interest rates will fall immediatel7 if the li* idit7 effect is _____ than the other mone7 s ))l7 effects and there is _____ ad' stment of e0)ected inflation. ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii larger; fast ()''''''''''''''''''''''''''''''''''''''''''''''' larger; slow ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk smaller; slow ()lllllllllllllllllllllllllllllllllllllllllllllll smaller; fast Answer: Q estion !tat s: "re#io s $dition

1;=,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)%;6 @hen the growth rate of the mone7 s ))l7 is increased, interest rates will fall immediatel7 if the li* idit7 effect is _____ than the other mone7 s ))l7 effects and there is _____ ad' stment of e0)ected inflation. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm arger; fast ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn larger; slow ()ooooooooooooooooooooooooooooooooooooooooooooooo smaller; slow ()))))))))))))))))))))))))))))))))))))))))))))))) smaller; fast Answer: Q estion !tat s: "re#io s $dition )%;1 @hen the growth rate of the mone7 s ))l7 is decreased, interest rates will rise immediatel7 if the li* idit7 effect is _____ than the other mone7 s ))l7 effects and there is _____ ad' stment of e0)ected inflation. ()*********************************************** larger; fast ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr larger; slow ()sssssssssssssssssssssssssssssssssssssssssssssss smaller; slow ()ttttttttttttttttttttttttttttttttttttttttttttttt smaller; fast Answer: Q estion !tat s: "re#io s $dition )%;% @hen the growth rate of the mone7 s ))l7 is increased, interest rates will rise immediatel7 if the li* idit7 effect is _____ than the other mone7 s ))l7 effects and there is _____ ad' stment of e0)ected inflation. () larger; fast ()############################################### larger; slow ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww smaller; slow ()00000000000000000000000000000000000000000000000 smaller; fast Answer: Q estion !tat s: "re#io s $dition

)%;& If the ,ed wants to )ermanentl7 lower interest rates, then it sho ld lower the rate of mone7 growth if ()77777777777777777777777777777777777777777777777 there is fast ad' stment of e0)ected inflation. ()88888888888888888888888888888888888888888888888 there is slow ad' stment of e0)ected inflation. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa the li* idit7 effect is smaller than the e0)ected inflation effect. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb the li* idit7 effect is larger than the other effects. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1=6

)%;( If the ,ed wants to )ermanentl7 lower interest rates, then it sho ld raise the rate of mone7 growth if ()cccccccccccccccccccccccccccccccccccccccccccccccc there is fast ad' stment of e0)ected inflation. ()dddddddddddddddddddddddddddddddddddddddddddddddd there is slow ad' stment of e0)ected inflation. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee the li* idit7 effect is smaller than the e0)ected inflation effect. ()ffffffffffffffffffffffffffffffffffffffffffffffff the li* idit7 effect is larger than the other effects. Answer: Q estion !tat s: "re#io s $dition )%;/ @hich of the following effects of a change in the mone7 s ))l7 is most likel7 to affect the interest rate differentl7 than the othersL ()gggggggggggggggggggggggggggggggggggggggggggggggg <he e0)ected inflation effect ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh <he income effect ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii <he li* idit7 effect ()'''''''''''''''''''''''''''''''''''''''''''''''' <he )rice le#el effect Answer: Q estion !tat s: "re#io s $dition )%;2 -ilton ,riedman contends that it is entirel7 )ossible that when the mone7 s ))l7 rises, interest rates ma7 _____ if the _____ effect is more than offset b7 changes in income, the )rice le#el, and e0)ected inflation. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk fall; li* idit7 ()llllllllllllllllllllllllllllllllllllllllllllllll fall; risk ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm r ise; li* idit7 ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn rise; risk Answer: Q estion !tat s: "re#io s $dition )%;9 It is entirel7 )ossible that when the mone7 s ))l7 rises, interest rates ma7 _____ if the _____ effect is more than offset b7 changes in income, the )rice le#el, and e0)ected inflation. ()oooooooooooooooooooooooooooooooooooooooooooooooo fall; li* idit7 ())))))))))))))))))))))))))))))))))))))))))))))))) fall; risk ()************************************************ rise; li* idit7 ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr rise; risk Answer: Q estion !tat s: "re#io s $dition )%;; 3f the fo r effects on interest rates from an increase in the mone7 s ))l7, the one that works in the o))osite direction of the other three is the ()ssssssssssssssssssssssssssssssssssssssssssssssss li* idit7 effect. ()tttttttttttttttttttttttttttttttttttttttttttttttt income effect. () )rice le#el effect. ()################################################ e0)ected inflation effect. Answer: Q estion !tat s: "re#io s $dition

1=1,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

)%;= 3f the fo r effects on interest rates from an increase in the mone7 s ))l7, the initial effect is, generall7, the ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww income effect. ()000000000000000000000000000000000000000000000000 li* idit7 effect. ()777777777777777777777777777777777777777777777777 )rice le#el effect. ()888888888888888888888888888888888888888888888888 e0)ected inflation effect. Answer: Q estion !tat s: "re#io s $dition )%=6 If the li* idit7 effect is larger than the other effects, an increase in mone7 growth will ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa lower interest rates. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb raise interest rates. ()ccccccccccccccccccccccccccccccccccccccccccccccccc ca se interest rates to rise initiall7 b t then fall below the initial le#el. ()ddddddddddddddddddddddddddddddddddddddddddddddddd ca se interest rates to fall initiall7 b t then rise abo#e the initial le#el. Answer: Q estion !tat s: "re#io s $dition )%=1 If the li* idit7 effect is smaller than the other effects, and the ad' stment to e0)ected inflation is slow, then the ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee interest rate will fall. ()fffffffffffffffffffffffffffffffffffffffffffffffff interest rate will rise. ()ggggggggggggggggggggggggggggggggggggggggggggggggg interest rate will initiall7 fall b t e#ent all7 climb abo#e the initial le#el in res)onse to an increase in mone7 growth. ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh interest rate will initiall7 rise b t e#ent all7 fall below the initial le#el in res)onse to an increase in mone7 growth. Answer: Q estion !tat s: "re#io s $dition )%=% If the li* idit7 effect is smaller than the other effects, and the ad' stment to e0)ected inflation is immediate, then the ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii interest rate will fall. ()''''''''''''''''''''''''''''''''''''''''''''''''' interest rate will rise. ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk interest rate will fall immediatel7 below the initial le#el when the mone7 s ))l7 grows. ()lllllllllllllllllllllllllllllllllllllllllllllllll interest rate will rise immediatel7 abo#e the initial le#el when the mone7 s ))l7 grows. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1=%

Figure 5-5 )%=& ,ig re /-/ ill strates the effect of an increased rate of mone7 s ))l7 growth. ,rom the fig re, one can concl de that the ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm l i* idit7 effect is smaller than the e0)ected inflation effect and interest rates ad' st * ickl7 to changes in e0)ected inflation. ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn li* idit7 effect is larger than the e0)ected inflation effect and interest rates ad' st * ickl7 to changes in e0)ected inflation. ()ooooooooooooooooooooooooooooooooooooooooooooooooo li* idit7 effect is larger than the e0)ected inflation effect and interest rates ad' st slowl7 to changes in e0)ected inflation. ()))))))))))))))))))))))))))))))))))))))))))))))))) li* idit7 effect is smaller than the e0)ected inflation effect and interest rates ad' st slowl7 to changes in e0)ected inflation. Answer: Q estion !tat s: "re#io s $dition )%=( ,ig re /-/ ill strates the effect of an increased rate of mone7 s ))l7 growth. ,rom the fig re, one can concl de that the ()************************************************* ,isher effect is dominated b7 the li* idit7 effect and interest rates ad' st slowl7 to changes in e0)ected inflation. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr li* idit7 effect is dominated b7 the ,isher effect and interest rates ad' st slowl7 to changes in e0)ected inflation. ()sssssssssssssssssssssssssssssssssssssssssssssssss li* idit7 effect is dominated b7 the ,isher effect and interest rates ad' st * ickl7 to changes in e0)ected inflation. ()ttttttttttttttttttttttttttttttttttttttttttttttttt ,isher effect is smaller than the e0)ected inflation effect and interest rates ad' st * ickl7 to changes in e0)ected inflation. Answer: Q estion !tat s: "re#io s $dition

1=&,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

Figure 5-6 )%=/ ,ig re /-2 ill strates the effect of an increased rate of mone7 s ))l7 growth. ,rom the fig re, one can concl de that the () li* idit7 effect is smaller than the e0)ected inflation effect and interest rates ad' st * ickl7 to changes in e0)ected inflation. ()################################################# li* idit7 effect is larger than the e0)ected inflation effect and interest rates ad' st * ickl7 to changes in e0)ected inflation. ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww li* idit7 effect is larger than the e0)ected inflation effect and interest rates ad' st slowl7 to changes in e0)ected inflation. ()0000000000000000000000000000000000000000000000000 li* idit7 effect is smaller than the e0)ected inflation effect and interest rates ad' st slowl7 to changes in e0)ected inflation. Answer: Q estion !tat s: "re#io s $dition )%=2 ,ig re /-2 ill strates the effect of an increased rate of mone7 s ))l7 growth. ,rom the fig re, one can concl de that the ()7777777777777777777777777777777777777777777777777 ,isher effect is dominated b7 the li* idit7 effect and interest rates ad' st slowl7 to changes in e0)ected inflation. ()8888888888888888888888888888888888888888888888888 li* idit7 effect is dominated b7 the ,isher effect and interest rates ad' st slowl7 to changes in e0)ected inflation. ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa li* idit7 effect is dominated b7 the ,isher effect and interest rates ad' st * ickl7 to changes in e0)ected inflation. ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb ,isher effect is smaller than the e0)ected inflation effect and interest rates ad' st * ickl7 to changes in e0)ected inflation. Answer: Q estion !tat s: "re#io s $dition

5ha)ter /<he 4eha#ior of Interest :ates1=(

Figure 5-7 )%=9 ,ig re /-9 ill strates the effect of an increased rate of mone7 s ))l7 growth. ,rom the fig re, one can concl de that the ()cccccccccccccccccccccccccccccccccccccccccccccccccc li* idit7 effect is smaller than the e0)ected inflation effect and interest rates ad' st * ickl7 to changes in e0)ected inflation. ()dddddddddddddddddddddddddddddddddddddddddddddddddd li* idit7 effect is larger than the e0)ected inflation effect and interest rates ad' st * ickl7 to changes in e0)ected inflation. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee li* idit7 effect is larger than the e0)ected inflation effect and interest rates ad' st slowl7 to changes in e0)ected inflation. ()ffffffffffffffffffffffffffffffffffffffffffffffffff li* idit7 effect is smaller than the e0)ected inflation effect and interest rates ad' st slowl7 to changes in e0)ected inflation. Answer: Q estion !tat s: "re#io s $dition )%=; ,ig re /-9 ill strates the effect of an increased rate of mone7 s ))l7 growth. ,rom the fig re, one can concl de that the ()gggggggggggggggggggggggggggggggggggggggggggggggggg ,isher effect is dominated b7 the li* idit7 effect and interest rates ad' st slowl7 to changes in e0)ected inflation ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh li* idit7 effect is dominated b7 the ,isher effect and interest rates ad' st slowl7 to changes in e0)ected inflation ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii li* idit7 effect is dominated b7 the ,isher effect and interest rates ad' st * ickl7 to changes in e0)ected inflation ()'''''''''''''''''''''''''''''''''''''''''''''''''' ,isher effect is smaller than the e0)ected inflation effect and interest rates ad' st * ickl7 to changes in e0)ected inflation Answer: Q estion !tat s: "re#io s $dition

1=/,rederic !. -ishkin.Economics of Money, Banking, and Financial Markets, !e#enth $dition

Questions for Web Appendix on Asset Pricing

)%== <he riskiness of an asset is meas red b7 ()kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk the magnit de of its ret rn. ()llllllllllllllllllllllllllllllllllllllllllllllllll the absol te #al e of an7 change in the assetHs )rice. ()mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm t he standard de#iation of its ret rn. ()nnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnnn all of the abo#e. ()oooooooooooooooooooooooooooooooooooooooooooooooooo risk is im)ossible to meas re. Answer: Q estion !tat s: +ew <he riskiness of an asset that is ni* e to the )artic lar asset is ())))))))))))))))))))))))))))))))))))))))))))))))))) s7stematic risk. ()************************************************** )ortfolio risk. ()rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr in#estment risk. ()ssssssssssssssssssssssssssssssssssssssssssssssssss interest-rate risk. ()tttttttttttttttttttttttttttttttttttttttttttttttttt nons7stematic risk. Answer: Q estion !tat s: +ew

Questions for Web Appendix on Gold

)1 An increase in e0)ected inflation will _____ the ____ for gold, _____ its )rice. () increase; demand; increasing ()################################################## decrease; demand; decreasing ()wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwincrease; s ))l7; increasing ()00000000000000000000000000000000000000000000000000 increase; s ))l7; decreasing ()77777777777777777777777777777777777777777777777777 decrease; s ))l7; increasing Answer: Q estion !tat s: +ew )&6% A ret rn to the gold standard, that is, sing gold for mone7 will _____ the ____ for gold, _____ its )rice. ()88888888888888888888888888888888888888888888888888 increase; demand; increasing ()aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa decrease; demand; decreasing ()bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb increase; s ))l7; increasing ()ccccccccccccccccccccccccccccccccccccccccccccccccccc increase; s ))l7; decreasing ()ddddddddddddddddddddddddddddddddddddddddddddddddddd decrease; s ))l7; increasing Answer: Q estion !tat s: +ew

5ha)ter /<he 4eha#ior of Interest :ates1=2

)%

Iisco#er7 of new gold in Alaska will _____ the ____ for gold, _____ its )rice. ()eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee increase; demand; increasing ()fffffffffffffffffffffffffffffffffffffffffffffffffff decrease; demand; decreasing ()ggggggggggggggggggggggggggggggggggggggggggggggggggg increase; s ))l7; increasing ()hhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh increase; s ))l7; decreasing ()iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii decrease; s ))l7; increasing Answer: Q estion !tat s: +ew

Essay Questions
1) Iemonstrate gra)hicall7 and e0)lain the effect in the bond market of a decrease in the federal deficit. @hat is the effect on the interest rate and bond )ricesL Dow might ca)ital s)ending be affected b7 the deficitL

%)

Iemonstrate gra)hicall7 the effect of an increase in the )ersonal sa#ings rate. !how and e0)lain the effect of increased sa#ings on bond )rices and interest rates. Dow wo ld this change affect ca)ital s)endingL

I ring "resident :eaganHs administration, his s ))orters arg ed that higher real interest rates were the res lt of )olicies increasing the )rofitabilit7 of in#estment. :eaganHs critics arg ed that the high interest rates were the res lt of high b dget deficits. Iemonstrate gra)hicall7 and e0)lain how increased )rofitabilit7 of in#estments and increased deficits affect bond )rices and interest rates. 4ased on 7o r gra)hs, is there merit to either #iew)ointL

)1

In the li* idit7 )reference framework, demonstrate gra)hicall7 the effect of a decrease in the mone7 s ))l7. Indicate on the gra)h the e0cess demand or e0cess s ))l7 of mone7. $0)lain the )rocess of ad' stment that res lts in a change in the e* ilibri m interest rate, and the direction of the change in rates. $conomists recogni8e that interest rates are t7)icall7 )roc7clical, meaning that interest rates increase d ring economic e0)ansions and decline d ring recessions. :eal income and generall7 inflation rise and fall with the econom7. >sing the li* idit7 )reference model of interest rates, gi#e three reasons wh7 interest rates are )roc7clical.

)%