ECN 135 Reading Quiz 4(chapter 5) PDF

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1. Holding all other factors constant, the quantity demanded of an asset is A. positively related to the risk of its returns relative to alternative assets. B. positively related to wealth. C. negatively related to its expected return relative to alternative assets. D. negatively related to its liquidity relative to alternative assets.

Answer:B

2. In the bond market, the bond demanders are the ________ and the bond suppliers are the ________. Answer: D A. lenders; advancers B. borrowers; lenders C. borrowers; advancers D. lenders; borrowers 3. If the interest rate on a bond is above the equilibrium interest rate, there is an excess ________ for bonds and the bond price will ________. Answer: B A. supply; fall B. demand; rise C. supply; rise D. demand; fall 4. When the price of a bond decreases, all else equal, the bond demand curve ________. A. does not shift Answer: A B. shifts right C. inverts D. shifts left 5. Everything else held constant, an increase in the riskiness of bonds relative to alternative assets causes the demand for bonds to ________ and the demand curve to shift to the ________. A. fall; right Answer: D B. rise; left C. rise; right D. fall; left 6. In Keynes's liquidity preference framework, individuals are assumed to hold their wealth in two forms: Answer: A A. money and bonds. B. real assets and financial assets. C. stocks and bonds. D. money and gold. 7. The opportunity cost of holding money is A. the interest rate.

Answer: A

B. the level of income. C. the price level. D. the discount rate. 8. In the market for money, when real income ________, the demand curve for money shifts to the ________ and the interest rate ________, everything else held constant. Answer: B A. rises; left; rises B. rises; right; rises C. falls; right; rises D. falls; left; rises 9. In the market for money, when the Fed decreases the money stock, the money supply curve shifts to the ________ and the interest rate ________, everything else held constant. Answer:A A. left; rises B. right; rises C. right; falls D. left; falls 10. Of the four effects on interest rates from an increase in the money supply, the initial effect is, generally, the Answer:C A. price level effect. B. income effect. C. liquidity effect. D. expected inflation effect....