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- In the case where money demand is completely interest insensitive (interest elasticity equals zero), an increase in the quantity of money will a. leave both income and the interest rate unchanged. b. lower the interest rate but leave income unchanged. c. increase income and lower the interest rate. d. increase income but leave the interest rate unchanged.P b. Show (by changing demand curves accordingly) in the following graphs what happens in the financial markets when the default risk is high. D1 S1 Treasury bond P D1 S1 Corporate bondWhen the demand for money is greater than the supply of money: A) people offering to sell nonmonetary financial assets must increase the interest rate these assets pay in order to sell them. B) more people will hold money. C) the opportunity cost of holding money will fall. D) interest rates will fall.
- Suppose an increase in demand in the market for mutual funds (a financial capital market) causes the interest rate to increase from 2% to 4%. How will this increase in demand affect supply and quantity supplied?Over the last 10 years the Federal Reserve has substantially changed the way itoperates. What is different about how the Federal Reserve now conducts policy? a) It is more secretive about interest rate and other policy changes b) it gives the public forward guidance on what it will do c) it places fewer regulations on commercial banks d) it discuesses its policy in public and asks for guidance from CongressExplain why you would be more or less willing to buy ahouse under the following circumstances:a. You just inherited $100,000.b. Real estate commissions fall from 6% of the salesprice to 5% of the sales price.c. You expect Microsoft stock to double in value next year.d. Prices in the stock market become more volatile.e. You expect housing prices to fall.
- (S1) Banks charge larger bid/ask spreads than they would on less liquid, less traded currencies. (S2) At any given point in time, a bank's bid quote will be greater than its ask quote.A. Statement 1 is true.B. Statement 2 is true.C. Both statements are true.D. Both statements are false.What effect will a sudden increase in the volatility of gold prices have on interest rates? Explain your answer with a graph.Economi 15. The federal deposit insurance corporation (FDIC) insures individual bank accounts up to $250,000 per account. Which of the following statements regarding FDIC insurance is true? FDIC insurance a. does not eliminate the need for reserve requirements because bank runs can't be eliminated in a fractional reserve banking system b. has prevented bank runs because the FDIC pays depositors interest at the discount rate on their accounts c. eliminates the need for reserve requirements because banks are not liable for any depositor losses d. works in coordination with reserve requirements to ensure depositor confidence, preventing bank runs.
- For the statements below indicate if it is true or false. If the statement is false, rewrite so that it is a true statement. a. The discount rate is the interest rate that one bank charges on a loan to another bank TRUE/False :Money Supply: M = 8000Money Demand: M= 10,000 – 40,000rwhere money is in billions of dollars and interest rates, r , is written as a decimal(e.g., an interest rate of 10% would be written as .1 in the equation).A. Determine the equilibrium interest rate and quantity of money.Suppose the U.S. Treasury issued $50 billion of short-term securities and sold them to the public. Other things held constant, what would be the most likely effect on short-term securities' prices and interest rates? a. Prices and interest rates would both rise. b. Prices would rise and interest rates would decline. c. Prices and interest rates would both decline. d. Prices would decline and interest rates would rise. e. There is no reason to expect a change in either prices or interest rates.
