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Economics
- Suppose that there is
excess supply of money at the current interest rate. During the adjustment process:
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a. |
interest rates will rise and |
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b. |
interest rates and bond prices will both rise |
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|
c. |
interest rates and bond prices will both fall
|
|
|
d. |
interest rates will fall and bond prices will rise Explain it correctly |
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- What happens to the equilibrium price of bonds if the supply of bonds shifts leftward? A. Bond price declines B. Bond price increases C. Bond price does not changeWhich of the following statements is correct regarding bonds? A. An increase in market interest rate would reduce a bond's yield. B. Bonds with high yields reflect high risk instruments. C. The equilibrium market price of a bond is always greater than the present value of that bond. D. A decrease in the market interest rate would result in a decrease in the present value of the bond. dont use chatgpt answerStock prices fell throughout much of 2007 and 2008 and many investors decided to switch their funds into the bond market. What only about 30 percent of surveyed investors knew was that as bond prices rise, interest rates a. fall in reaction to the decreased demand for bonds. b. rise in reaction to the increased demand for bonds. c. fall in reaction to the increased demand for bonds. d. rise in reaction to the decreased demand for bonds.
- d. Now suppose that the supply of money is $1trn. Assume equilibrium in financial markets. Calculate the equilibrium interest rate. In equilibrium, money demand = money supply. $1.5 (0.8-2i) = $1 please show calculation step by stepWhich bond should have the highest interest rate? A. Low quality bonds B. Medium quality bonds C. High quality bonds Which of the following statements is NOT true? A. Stock owners benefit from stock price increases B. Common stocks are not securities C. Stock prices tend to be very volatile D. Higher stock prices allow companies access to more capital What is the expected impact of a decline in the money supply to the US economy? A. Lower aggregate prices (deflation) B. Higher aggregate prices (inflation) C. There is no general relationship between the money supply and inflaton Which of the following is NOT a component of federal fiscal policy? A. Federal tax revenues B. Federal government expenditures C. Federal budget deficit D. All of the above are components of federal fiscal policy A strong US dollar tends to A. Reduce exports to foreign…The supply of bonds comes from Select one: O A. Savers OB. Borrowers OC. Financial Intermediaries O D. Households
- Using the demand and supply curves for bonds, explain the effect of the following on the interest rates. a. A business cycle contraction b. Low inflationary expectation24)To reassure investors who were unwilling to buy mortgages in the secondary market, the U.S. Congress used two government-sponsored enterprises (GSEs) called, ________. The GSEs role was to sell bonds to investors and use the funds to purchase mortgages from _______. Select one: a. the Fed and the Treasury Department; Households b. the Fed and Treasury Department; Banks c. Fannie Mae and Freddie Mac; Households d. Fannie Mae and Freddie Mac; Banks e. Fannie Mae and Freddie Mac; Investment BanksPlease explain the relationship between bond market and money market. Explain the process how an increase in the money supply by the Fed lowers the interest rate through the BOND MARKET to reach the new equilbrium interest rate. Explain the impact of increase in GDP on the interest rate.
- What might rising term spreads suggest Select one: a. that markets anticipate future interest rates to rise in the future b. that markets anticipate the demand for loans to increase in the future c. that markets anticipate more risk of default d. only A and B of the above are trueSuppose a credit market with good borrowers and 1−a bad borrower. The good borrowers are all identical and always repay their loans. Bad borrowers never repay their loans. Banks issue deposits that pay a real interest rate r, and make loans to borrowers. Banks cannot tell the difference between a good borrower and a bad one. Each borrower has collateral, which is an asset that is worth A units of future consumption goods in the future period. Determine the interest rate on loans made by banks. How will the interest rate change if each borrower has more collateral?If the bank of Canada ________ bonds, interest rates will fall and the price of bonds will ________. Select one: a. buys; rise b. sells; rise c. sells; fall d. buys; fall
