1. As a result of higher expected inflation,
- the demand and supply curves for loan able funds both shift to the left and the equilibrium interest rate usually falls.
- the demand and supply curves for loan able funds both shift to the right and the equilibrium interest rate usually rises.
- the demand curve for loan able funds shifts to the right, the supply curve for loan able funds shifts to the left, and the equilibrium interest rate usually rises.
- the demand curve for loan able funds shifts to the left, the supply curve for loan able funds shifts to the right, and the equilibrium interest rate usually rises.
2. If expected inflation declines by 2%, what should happen to nominal interest rates according to the Fisher effect?
- fall by 2%
- be cut in half
- rise by 2%
- double in size
3. During an economic recession,
- the bond demand curve shifts to the left, the bond supply curve shifts to the right, and the equilibrium interest rate usually rises.
- the bond demand and supply curves both shift to the right and the equilibrium interest rate usually rises.
- the bond demand and supply curves both shift to the left and the equilibrium interest rate usually falls.
- the bond demand curve shifts to the right, the bond supply curve shifts to the left, and the equilibrium interest rate usually falls.
4. During a period of economic expansion, when expected profitability is high,
- the supply curve of bonds shifts to the right.
- the demand curve for bonds shifts to the left.
- the equilibrium price of bonds rises.
- the equilibrium interest rate falls.
5. The supply curve for bonds would be shifted to the left by
- an increase in tax subsidies for investment.
- an increase in expected inflation.
- a decrease in government borrowing.
- a decrease in the corporate tax on profits.