When the federal governments budget deficit decreases

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37) When the federal government’s budget deficit decreases, the _____ curve for bonds shifts to the _____ A) demand; right. B) demand; left. C) supply; left. D) supply; right. Answer: C 38) When the inflation rate is expected to increase, the expected return on bonds relative to real assets falls for any given interest rate; the _____ for bonds falls and the _____ curve shifts to the left. 43 39) When the inflation rate is expected to increase, the real cost of borrowing declines at any given interest rate; the _____ of bonds increases and the _____ curve shifts to the right. Figure 4-1 40) In Figure 4-1, the most likely cause of the increase in the equilibrium interest rate from i 1 to i 2 is 41) In Figure 4-1, the most likely cause of the increase in the equilibrium interest rate from i 1 to i 2 is A) an increase in the expected inflation rate. B) a decrease in the expected inflation rate. C) a sharp decline in the growth rate of the money supply. D) a combination of both (A) and (C) of the above. Answer: A 42) In Figure 4-1, the most likely cause of a decrease in the equilibrium interest rate from i 2 to i 1 is 44
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43) Factors that can cause the supply curve for bonds to shift to the right include 44) Factors that can cause the supply curve for bonds to shift to the left include 45) The economist Irving Fisher, after whom the Fisher effect is named, explained why interest rates _____ as the expected rate of inflation _____ A) rise; increases. B) rise; stabilizes. C) rise; decreases. D) fall; increases. E) fall; stabilizes. Answer: A 46) An increase in the expected rate of inflation causes the demand curve for bonds to _____ and the supply curve for bonds to _____
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