Factors that determine the demand for an asset

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13) Factors that determine the demand for an asset include changes in the A) wealth of investors. B) liquidity of bonds relative to alternative assets. C) expected returns on bonds relative to alternative assets. D) risk of bonds relative to alternative assets. E) all of the above. Answer: E 14) In a recession when income and wealth are falling, the demand for bonds _____ and the demand curve shifts to the _____ 15) During business cycle expansions when income and wealth are rising, the demand for bonds _____ and the demand curve shifts to the _____ 16) For a holding period of one year, the expected return on a consol is _____ the higher is the price of the consol today, and _____ the higher is the price of the consol next year. 17) Higher expected interest rates in the future ____ the demand for long-term bonds and shift the demand curve to the _____ A) increase; left. B) increase; right. C) decrease; left. D) decrease; right. Answer: C 39 18) Lower expected interest rates in the future ____ the demand for long-term bonds and shift the demand curve to the _____ 19) When people begin to expect a large stock market decline, the demand curve for bonds shifts to the _____ and the interest rate _____ 20) When people begin to expect a large run up in stock prices, the demand curve for bonds shifts to the _____ and the interest rate _____ 21) An increase in the expected rate of inflation will _____ the expected return on bonds relative to that on _____ assets, and shift the _____ curve to the left. A) reduce; financial; demand B) reduce; real; demand C) raise; financial; supply D) raise; real; supply Answer: B 22) A decrease in the expected rate of inflation will _____ the expected return on bonds relative to that on _____ assets. 23) When the expected inflation rate increases, the demand for bonds _____, the supply of bonds _____, and the interest rate ______ 40
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24) When the expected inflation rate decreases, the demand for bonds _____, the supply of bonds _____, and the interest rate ______
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