Of the four factors that influence asset demand, which factor will cause the demand for all assets to increase when it increases, everything else held constant? Everything else held constant, if the expected return on U. Everything else held constant, would an increase in volatility of stock prices have any impact on the demand for rare coins? Why or why not? Yes, it would cause the demand for rare coins to increase.

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The increased volatility of stock prices means that there is relatively more risk in owning stock than there was previously and so the demand for an alternative asset, rare coins, would increase. In the figure above, a factor that could cause the demand for bonds to decrease shift to the left is. In the figure above, a factor that could cause the supply of bonds to increase shift to the right is.

What is the impact on interest rates when the Federal Reserve decreases the money supply by selling bonds to the public? Bond supply increases and the bond supply curve shifts to the right. The new equilibrium bond price is lower and thus interest rates will increase. Use demand and supply analysis to explain why an expectation of Fed rate hikes would cause Treasury prices to fall. The expected return on bonds would decrease relative to other assets resulting in a decrease in the demand for bonds.

The leftward shift of the bond demand curve results in a new lower equilibrium price for bonds. In Keynes's liquidity preference framework, individuals are assumed to hold their wealth in two forms. In his Liquidity Preference Framework, Keynes assumed that money has a zero rate of return; thus. Using the liquidity preference framework, what will happen to interest rates if the Fed increases the money supply? The Fed's actions shift the money supply curve to the right.

The new equilibrium interest rate will be lower than it was previously. Using the liquidity preference framework, show what happens to interest rates during a business cycle recession.

During a business cycle recession, income will fall. This causes the money demand curve to shift to the left. The resulting equilibrium will be at a lower interest rate. Of the four effects on interest rates from an increase in the money supply, the initial effect is, generally, the. In the liquidity preference framework, a one-time increase in the money supply results in a price level effect. The maximum impact of the price level effect on interest rates occurs. Of the four effects on interest rates from an increase in the money supply, the one that works in the opposite direction of the other three is the.

When the growth rate of the money supply increases, interest rates end up being permanently lower if. If the Fed wants to permanently lower interest rates, then it should raise the rate of money growth if. If the liquidity effect is smaller than the other effects, and the adjustment to expected inflation is slow, then the. If the liquidity effect is smaller than the other effects, and the adjustment to expected inflation is immediate, then the.

In the figure above, illustrates the effect of an increased rate of money supply growth at time period 0. From the figure, one can conclude that the. The figure above illustrates the effect of an increased rate of money supply growth at time period T0. Both the CAPM and APT suggest that an asset should be priced so that it has a higher expected return. Create Cards Home Notecards Books My Classes My Locker Bingo Rooms.

The Economics of Money, Banking and Financial Markets Chapter 5 created 9 months ago by powerup 2, views. Small x Medium x Large x Custom size. List view Comments 0 Related sets. Pieces of property that serve as a store of value are called A assets. B units of account.

A wealth B expected returns C risk D liquidity. A increases; increases B increases; decreases C decreases; decreases D decreases; increases.

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Everything else held constant, a decrease in wealth A increases the demand for stocks. B increases the demand for bonds. C reduces the demand for silver. D increases the demand for gold. A increases B decreases C has no effect on D erases. A rises; rises B rises; falls C falls; rises D falls; falls. A increase; increase B increase; decrease C decrease; decrease D decrease; increase. A reduce; financial B reduce; real C raise; financial D raise; real.

A decrease; decrease B decrease; increase C increase; increase D increase; decrease. The demand for Picasso paintings rises holding everything else equal when A stocks become easier to sell. B people expect a boom in real estate prices. C Treasury securities become riskier. D people expect gold prices to rise. The demand for silver decreases, other things equal, when A the gold market is expected to boom. B the market for silver becomes more liquid. C wealth grows rapidly. D interest rates are expected to rise.

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You would be less willing to purchase U. B you expect interest rates to fall. C gold becomes more liquid. D stock prices are expected to fall.

B interest rates are expected to rise. C your wealth has decreased. D you expect diamonds to appreciate in value. The demand for gold increases, other things equal, when A the market for silver becomes more liquid.

C interest rates are expected to fall. D real estate prices are expected to increase. The demand for houses decreases, all else equal, when A wealth increases. B real estate prices are expected to increase. C stock prices become more volatile. D gold prices are expected to increase. Holding everything else constant A if asset A's risk rises relative to that of alternative assets, the demand will increase for asset A.

B the more liquid is asset A, relative to alternative assets, the greater will be the demand for asset A. C the lower the expected return to asset A relative to alternative assets, the greater will be the demand for asset A. D if wealth increases, demand for asset A increases and demand for alternative assets decreases. Holding all other factors constant, the quantity demanded of an asset is A positively related to wealth. B negatively related to its expected return relative to alternative assets.

C positively related to the risk of its returns relative to alternative assets. D negatively related to its liquidity relative to alternative assets. A decreases; increases B decreases; decreases C increases; increases D increases; decreases. A increases; decreases B increases; increases C decreases; decreases D decreases; increases. A lenders; borrowers B lenders; advancers C borrowers; lenders D borrowers; advancers. A higher; demand B higher; quantity demanded C lower; demand D lower; quantity demanded.

A downward; inverse B downward; direct C upward; inverse D upward; direct. A falls; supply B falls; quantity supplied C rises; supply D rises; quantity supplied. A price; deposit B interest rate; deposit C price; interest rate D interest rate; premium. A demand for; rise B demand for; fall C supply of; fall D supply of; rise. A above; rise B above; fall C below; fall D below; rise.

A demand; rise B demand; fall C supply; fall D supply; rise. A above; demand; rise B above; demand; fall C below; supply; fall D above; supply; rise. A fewer; fall B fewer; rise C more; fall D more; rise. A above; demand B above; supply C below; demand D below; supply. A demand; rise B demand; fall C supply; rise D supply; fall. A bond price B income C wealth D expected return.

When the price of a bond decreases, all else equal, the bond demand curve A shifts right. C does not shift. A falls; right B falls; left C rises; right D rises; left. A increase; right B increase; left C decrease; right D decrease; left.

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A rises; right B rises; left C falls; right D falls; left. A increases; right B decreases; right C increases; left D decreases; left. A decrease; left B decrease; right C increase; left D increase; right. A bonds; financial B bonds; real C real estate; financial D real estate; real.

A rise; right B rise; left C fall; right D fall; left. A right; rises B right; falls C left; falls D left; rises. A more; right; rises B more; right; falls C less; left; falls D less; left; does not change. A fall; right B fall, left C rise; right D rise; left. Factors that decrease the demand for bonds include A an increase in the volatility of stock prices.

B a decrease in the expected returns on stocks. C a decrease in the inflation rate. D a decrease in the riskiness of stocks. A increases; left B increases; right C decreases; left D decreases; right. A supply; supply; right B supply; supply; left C demand; demand; right D demand; demand; left. A increases; increases B increases; decreases C decreases; increases D decreases; decreases. A increase; left B increase; right C decrease; left D decrease; right. Factors that can cause the supply curve for bonds to shift to the right include A an expansion in overall economic activity.

B a decrease in expected inflation. C a decrease in government deficits. D a business cycle recession. A demand; demand B demand; supply C supply; demand D supply; supply.

A increases; increases; rises B decreases; decreases; falls C increases; decreases; falls D decreases; increases; rises. A fall; Keynes effect B fall; Fisher effect C rise; Keynes effect D rise; Fisher effect. A rise; increases B rise; stabilizes C fall; stabilizes D fall; increases. A right; left B right; right C left; left D left; right.

A increase; increase; increase B increase; decrease; increase C decrease; increase; increase D decrease; decrease; increase.

In the s Japan had the lowest interest rates in the world due to a combination of A inflation and recession. B deflation and expansion. C inflation and expansion. D deflation and recession. When the interest rate changes, A the demand curve for bonds shifts to the right. B the demand curve for bonds shifts to the left. C the supply curve for bonds shifts to the right.

D it is because either the demand or the supply curve has shifted. A supply; right B supply; left C demand; right D demand; left. A demand; right B demand; left C supply; right D supply; left. A demand; right B demand; left C supply; left D supply; right. Everything else held constant, when prices in the art market become more uncertain A the demand curve for bonds shifts to the left and the interest rate rises. B the demand curve for bonds shifts to the left and the interest rate falls.

C the demand curve for bonds shifts to the right and the interest rate falls. D the supply curve for bonds shifts to the right and the interest rate falls. Everything else held constant, when real estate prices are expected to decrease A the demand curve for bonds shifts to the left and the interest rate rises. Everything else held constant, when the government has higher budget deficits A the demand curve for bonds shifts to the left and the interest rate rises.

C the supply curve for bonds shifts to the right and the interest rate falls. D the supply curve for bonds shifts to the right and the interest rate rises. A demand; left; rises B demand; right; rises C demand; left; falls D supply; left; rises.

A left; rise B left; fall C right; rise D right; fall. A decreases; decreases; increases B decreases; decreases; decreases C increases; decreases; increases D increases; increases; increases. A increases; rises B increases; falls C decreases; rises D decreases; falls. In Keynes's liquidity preference framework, individuals are assumed to hold their wealth in two forms A real assets and financial assets.

B stocks and bonds. C money and bonds. D money and gold. In Keynes's liquidity preference framework A the demand for bonds must equal the supply of money. B the demand for money must equal the supply of bonds. C an excess demand of bonds implies an excess demand for money.

D an excess supply of bonds implies an excess demand for money. In Keynes's liquidity preference framework, if there is excess demand for money, there is A an excess demand for bonds. B equilibrium in the bond market. C an excess supply of bonds. D too much money. A expected inflation; bonds B expected inflation; money C government budget deficits; bonds D government budget deficits; money.

A a positive B a negative C a zero D an increasing. In his Liquidity Preference Framework, Keynes assumed that money has a zero rate of return; thus A when interest rates rise, the expected return on money falls relative to the expected return on bonds, causing the demand for money to fall. B when interest rates rise, the expected return on money falls relative to the expected return on bonds, causing the demand for money to rise. C when interest rates fall, the expected return on money falls relative to the expected return on bonds, causing the demand for money to fall.

D when interest rates fall, the expected return on money falls relative to the expected return on bonds, causing the demand for money to rise. A falls; bonds B falls; money C rises; bonds D rises; money. The opportunity cost of holding money is A the level of income. B the price level. C the interest rate. D the discount rate.

An increase in the interest rate A increases the demand for money. B increases the quantity of money demanded. C decreases the demand for money. D decreases the quantity of money demanded. If there is an excess supply of money A individuals sell bonds, causing the interest rate to rise. B individuals sell bonds, causing the interest rate to fall.

C individuals buy bonds, causing interest rates to fall. D individuals buy bonds, causing interest rates to rise. A sell; rise B sell; fall C buy; rise D buy; fall. A shift right B shift left C stay where it is D invert. A decrease; decrease B decrease; increase C increase; decrease D increase; increase. A falls; right; rises B rises; right; rises C falls; left; rises D rises; left; rises. A falls; right; rises B rises; right; falls C falls; left; rises D rises; right; rises.

A demand; decreases; fall B demand; increases; rise C supply; increases; rise D supply; decreases; fall. A decrease; right B decrease; left C increase; right D increase; left. A decreases; right; rises B increases; right; falls C decreases; left; falls D increases; left; rises. A A decrease; demand for; rise B An increase; demand for; fall C An increase; supply of; rise D A decrease; supply of; fall.

A An increase; money; rise B An increase; bonds; fall C A decrease; bonds; rise D A decrease; money; fall. A liquidity B price level C expected-inflation D income.

Of the four effects on interest rates from an increase in the money supply, the initial effect is, generally, the A income effect. C price level effect. D expected inflation effect. The maximum impact of the price level effect on interest rates occurs A at the moment the price level hits its peak stops rising because both the price level and expected inflation effects are at work. B immediately after the price level begins to rise, because both the price level and expected inflation effects are at work.

C at the moment the expected inflation rate hits its peak. D at the moment the inflation rate hits it peak. Of the four effects on interest rates from an increase in the money supply, the one that works in the opposite direction of the other three is the A liquidity effect.

A fall; liquidity B fall; risk C rise; liquidity D rise; risk. When the growth rate of the money supply increases, interest rates end up being permanently lower if A the liquidity effect is larger than the other effects. B there is fast adjustment of expected inflation.

C there is slow adjustment of expected inflation. D the expected inflation effect is larger than the liquidity effect.

A larger; fast B larger; slow C smaller; slow D smaller; fast. If the Fed wants to permanently lower interest rates, then it should raise the rate of money growth if A there is fast adjustment of expected inflation. B there is slow adjustment of expected inflation. C the liquidity effect is smaller than the expected inflation effect. D the liquidity effect is larger than the other effects.

If the liquidity effect is smaller than the other effects, and the adjustment to expected inflation is slow, then the A interest rate will fall. B interest rate will rise. C interest rate will initially fall but eventually climb above the initial level in response to an increase in money growth. D interest rate will initially rise but eventually fall below the initial level in response to an increase in money growth. If the liquidity effect is smaller than the other effects, and the adjustment to expected inflation is immediate, then the A interest rate will fall.

C interest rate will fall immediately below the initial level when the money supply grows. D interest rate will rise immediately above the initial level when the money supply grows. Interest rates increased continuously during the s. The most likely explanation is A banking failures that reduced the money supply.

B a rise in the level of income. C the repeated bouts of recession and expansion. D increasing expected rates of inflation. The riskiness of an asset is measured by A the magnitude of its return.

B the absolute value of any change in the asset's price. C the standard deviation of its return. D risk is impossible to measure. Holding many risky assets and thus reducing the overall risk an investor faces is called A diversification. A less; more B less; less C more; more D more; greater. A alpha B beta C CAPM D APT. The riskiness of an asset that is unique to the particular asset is A systematic risk. A systematic B nonsystematic C portfolio D investment.

Both the CAPM and APT suggest that an asset should be priced so that it has a higher expected return A when it has a greater systematic risk.

B when it has a greater risk in isolation. C when it has a lower systematic risk. D when it has a lower systematic risk and a lower risk in isolation. A nonsystematic risk B systematic risk C credit risk D arbitrary risk. A demand; increase B demand; decrease C supply; increase D supply; decrease. A increase; demand; increasing B decrease; demand; decreasing C increase; supply; increasing D decrease; supply; increasing.

A supply; right; increasing B supply; left; increasing C demand; right; decreasing D demand; left; decreasing.

A increase; demand; increasing B decrease; demand; decreasing C decrease; supply; increasing D increase; supply; decreasing.

A positively related B negatively related C inversely related D unrelated. A demand; demand B demand; supply C supply; supply D supply; equilibrium. A price of bonds B interest rate C quantity of bonds D quantity of loanable funds.

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