Download 1. A buyer of a newly-issued bond A) is a borrower of funds. C) is

Assignment 22 __________________________________________ AP GOV/ECON
1. A buyer of a newly-issued bond
A) is a borrower of funds.
B) is a lender of funds.
C) is purchasing ownership in the institution that issues the bonds.
D) must be a producer and not a consumer.
2. As the price of a bond _____, the interest rate___.
A) falls, rises
B) rises, rises
C) rises, remains unchanged
D) falls, falls
3. Which of the following statements is true?
A)
B)
C)
D)
The lower the price of a bond, relative to its face value, the lower the interest rate.
The lower the price of a bond, relative to its maturity, the lower the interest rate.
The higher the price of a bond, relative to its face value, the higher the interest rate.
The lower the price of a bond, relative to its face value, the higher the interest rate.
4. Which of the following statements is true about bonds?
A)
B)
C)
D)
Sellers of newly issued bonds are borrowers.
When the government and large corporations want to borrow money they buy bonds.
A bond owner must hold a bond until it matures.
The interest rate on a bond is directly related to its price.
5. The interest rate on a bond is
A) inversely related to its price.
B) directly related to its price.
C) determined by its face value.
D) determined by the time to maturity.
6. If bond prices rise,
A) interest rates rise, which in turn, discourage investment.
B) interest rates fall, which in turn, discourage investment.
C) interest rates rise, which in turn, stimulate investment.
D) interest rates fall, which in turn, stimulate investment.
7. When people hold money to make anticipated purchases of goods and services, they are exercising the _______
demand for money.
A) speculative
B) exchange
C) transactions
D) precautionary
8. Money held for contingencies reflects the _______ demand for money.
A) speculative
B) exchange
C) transactions
D) precautionary
9. The _______ demand for money is holding money in expectation that bond prices and the prices
might change.
A) speculative
B) exchange
C) transactions
of other assets
D) precautionary
10. The opportunity cost of holding money is
A)
B)
C)
D)
the liquidity foregone.
the higher interest rates that can be earned by holding a bond.
the decrease in risk from holding money rather than a bond.
the liquidity gained by holding ready cash.
11. The demand curve for money curve shows, all other things unchanged, the
A) quantity of money demanded at each price.
B) quantity of money demanded at each bond rate.
C) quantity of money demanded at each interest rate.
D) amount of money people demand at a specific interest rate.
12. Which of the following decreases the demand for money?
A) an increase in income
B) a decrease in real GDP
C) an increase in the price level
D) expectations of higher bond prices
13. Which of the following does not cause the money demand curve to shift?
A) a change in the interest rate
B) a change in the price level
C) a change in transfer costs
D) a change in real GDP
14. An increase in interest rates is likely to cause
A)
B)
C)
D)
firms and households to increase the quantity of money demanded.
firms and households to decrease the quantity of money demanded.
the money demand curve to shift to the right.
the money demand curve to shift to the left.
15. If the quantity of money supplied does not respond to change in the interest rate, then the money supply curve is
A) vertical.
B) horizontal.
C) relatively flat but upward sloping.
D) relatively steep but upward sloping.
16. What happens in the money market when there is an increase in the supply of money?
A)
B)
C)
D)
The equilibrium quantity of money increases and the equilibrium interest rate increases.
The equilibrium quantity of money increases and the equilibrium interest rate decreases.
The equilibrium quantity of money decreases and the equilibrium interest rate increases.
The equilibrium quantity of money decreases and the equilibrium interest rate decreases.
17. What happens in the money market when there is a decrease in the supply of money?
A)
B)
C)
D)
The equilibrium quantity of money increases and the equilibrium interest rate increases.
The equilibrium quantity of money increases and the equilibrium interest rate decreases.
The equilibrium quantity of money decreases and the equilibrium interest rate increases.
The equilibrium quantity of money decreases and the equilibrium interest rate decreases.
FIGURE 1
18. Refer to Figure 1. In equilibrium the interest rate is __ and
the quantity of money is ___.
A)
B)
C)
D)
r2, Q0
r0, Q2
r1, Q1
r1, Q2