As a knowledgeable investor in 2007, you should have realized that as interest rates fell, bond prices would
A. also fall.
B. rise.
C. become more volatile, like stock prices.
D. fall but not by as much as stock prices.
Answer: B
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
All of the following apply to the description of a market in equilibrium except: a. quantity supplied equals quantity demanded. b. the intersection of the supply and demand curves. c. no excess supply exists
d. no excess demand exists. e. the price of the good is falling.
The consumption function will shift upward if real asset and money holdings:
a. increase, if people expect prices to increase, if interest rates decrease, and if taxes decrease. b. increase, if people expect prices to increase, if interest rates increase, and if taxes increase. c. increase, if people expect prices to increase, if interest rates increase, and if taxes decrease. d. decrease, if people expect prices to decrease, if interest rates decrease, and if taxes decrease. e. decrease, if people expect prices to increase, if interest rates increase, and if taxes decrease.
If price falls, what happens to the demand for a product?
a. It increases. b. It decreases. c. It does not change. d. Uncertain--economic theory has no answer to this question.