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349 mid summer2 2013 mc sol

A bondsreal b physicalfinancial c bondsfinancial

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Unformatted text preview: are rising, the demand for bonds ________ and the demand curve shifts to the ________, everything else held constant. A) rises; right B) falls; right C) rises; left D) falls; left 14) Everything else held constant, an increase in expected inflation, lowers the expected return on ________ compared to ________ assets. A) bonds; real B) physical; financial C) bonds; financial D) physical; real 15) When the inflation rate is expected to increase, the ________ for bonds falls, while the ________ curve shifts to the right, everything else held constant. A) demand; demand B) supply; supply C) supply; demand D) demand; supply 16) When the government has a surplus, as occurred in the late 1990s, the ________ curve of bonds shifts to the ________, everything else held constant. A) supply; right B) demand; left C) demand; right D) supply; left 17) Over the next three years, the expected path of 1-year interest rates is 4, 1, and 1 percent. The expectations theory of the term structure predicts that the current interest rate on 3-year bond is ________. A) 3 percent B) 2 percent C) 1 percent D) 4 percent 18) According to the segmented markets theory of the term structure ________. A) because of the positive term premium, the yield curve will not be observed to be downward-sloping B) bonds of one maturity are close substitutes for bonds of other maturities, th...
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