Practice Quiz for Chapter 5.1. If real estate prices are expected to increase, then, other things equal, the demand for real estate will ____________ and that of Treasury bills will ___________.a. increase; increase b. increase; decreasec. decrease; decrease d. decrease; increase2. When the price of a bond is above the equilibrium price, there is an excess ______ bonds and price will ______________.a. demand for; rise b. demand for; fallc. supply of; fall d. supply of; rise3. Holding everything else constant, an increase in the expected return on common stock would _________ the demand for bonds, shifting the bond demand curve to the ______.a. decrease; left b. decrease; rightc. increase; left d. increase; right4. Holding everything else constant, when stock prices become less volatile, the demand curve for bonds shifts to the ___________ and the interest rate ____________.a. right; rises b. right; fallsc. left; falls d. left; rises5. Factors that can cause the supply curve for bonds to shift to the right includea. an expansion in overall economic activity.b. a decrease in expected inflation.c. a decrease in government deficits.d. a business cycle recession.6. When the economy enters a recession, normally the demand for bonds ________, the supply of bonds ___________, and the interest rate _______________, everything else held constant.a. increases; increases; risesb. decreases; decreases; fallsc. increases; decreases; fallsd. decreases; increases; rises7. Everything else held constant, when prices in the market for fine art become more volatile,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.8. In the liquidity preference framework, a rise in the price level causes the demand for money to _________ and the interest rate to _________, everything else held constant.a. decrease; decrease b. decrease; increasec. increase; decrease d. increase; increase9. In the liquidity preference framework, when the Federal Reserve decreases money, the money supply curve shifts to the _________ and the interest rate ___________, everything else held constant.a. right; rises b. right; fallsc. left; falls d. left; rises10. Of the four possible impacts to interest rates from an increase in the money supply, the one that works in the opposite direction of the other three is thea. liquidity effect. b. income effect.c. price level effect. d. expected inflation effect.Answers to the Chapter 5 practice quiz.1. B2. C3. A4. D5. A6. B7. C8. D9. D10. AAnswers to problems 1, 2, 3, 4 at the end of chapter 5.1. a. less; b. more; c. less; d. less; e. more2. a. more; b. more; c. less; d. more; e. less3. a. more; b. less; c. more; d. more4. a. more; b. more; c. less; d. less; e.
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