CH5: Effect of Variable Change to Quantity Demanded Flashcards
When the variable wealth increases, the quantity of an asset demanded __________.
Increases
When the variable wealth decreases, the quantity of an asset demanded __________.
Decreases
When the expected return of stocks are higher than bonds, then the quantity demanded for stocks _______________.
Increases
When the expected return of stocks are lower than bonds, then the quantity demanded for stocks _______________.
Decreases
When the expected return of real estate is higher than saving accounts, then the quantity demanded for real estate _______________.
Increases
When the expected return of real estate is lower than saving accounts, then the quantity demanded for real estate _______________.
Decreases
When the risk of loss in stocks rises, then the quantity demanded for stocks ___________.
Decreases
When the risk of loss in stock falls, then the quantity demanded for stocks _____________.
Increases
If the liquidity of cash is greater than real estate, then the quantity demand for cash _________________.
Increases
If real estate has more liquidity than carbon fuel credits, then the quantity demand for real estate _____________.
Increases
What is the effect of the variable WEALTH on quantity of an asset demanded when it INCREASES?
The quantity of an asset demanded** INCREASES**.
What is the effect of the variable WEALTH on quantity of an asset demanded when it DECREASES?
The quantity of an asset demanded** DECREASES**.
What is the effect of the variable EXPECTED RETURN RELATIVE to Other Assets on quantity of an asset demanded when it INCREASES?
The quantity of an asset demanded** INCREASES**.
What is the effect of the variable EXPECTED RETURN RELATIVE to Other Assets on quantity of an asset demanded when it DECREASES?
The quantity of an asset demanded** DECREASES**.
What is the effect of the variable LIQUIDITY RELATIVE to Other Assets on quantity of an asset demanded when it INCREASES?
The quantity of an asset demanded** INCREASES**.
What is the effect of the variable LIQUIDITY RELATIVE to Other Assets on quantity of an asset demanded when it DECREASES?
The quantity of an asset demanded** DECREASES**.
What is the effect of the variable RISK RELATIVE to Other Assets on quantity of an asset demanded when it DECREASES?
The quantity of an asset demanded** INCREASES**.
What is the effect of the variable RISK RELATIVE to Other Assets on quantity of an asset demanded when it INCREASES?
The quantity of an asset demanded** DECREASES**.
What is the effect of the variable WEALTH on the quantity demand for bonds when it INCREASES?
The quantity demand for bonds** INCREASES**.
What is the effect of the variable WEALTH on the quantity demand for bonds when it DECREASES?
The quantity demand for bonds** DECREASES**.
What is the effect of the variable EXPECTED INTEREST RATE on the quantity demand for bonds when it DECREASES?
The quantity demand for bonds** INCREASES**.
What is the effect of the variable EXPECTED INTEREST RATE on the quantity demand for bonds when it INCREASES?
The quantity demand for bonds** DECREASES**.
What is the effect of the variable EXPECTED INFLATION on the quantity demand for bonds when it INCREASES?
The quantity demand for bonds** DECREASES**.
What is the effect of the variable RISKINESS of BONDS on the quantity demand for bonds when it DECREASES?
The quantity demand for bonds** INCREASES**.
What is the effect of the variable RISKINESS of BONDS on the quantity demand for bonds when it INCREASES?
The quantity demand for bonds** DECREASES**.
What is the effect of the variable LIQUIDITY of BONDS on the quantity demand for bonds when it INCREASES?
The quantity demand for bonds** INCREASES**.
What is the effect of the variable LIQUIDITY of BONDS on the quantity demand for bonds when it DECREASES?
The quantity demand for bonds** DECREASES**.
What is the effect of the variable PROFITABILITY of INVESTMENTS on the quantity supplied of bonds when it INCREASES?
The quantity supplied for bonds** INCREASES**.
What is the effect of the variable PROFITABILITY of INVESTMENTS on the quantity supplied of bonds when it DECREASES?
The quantity supplied of bonds** DECREASES**.
What is the effect of the variable EXPECTED INFLATION on the quantity supplied of bonds when it INCREASES?
The quantity supplied of bonds** INCREASES**.
What is the effect of the variable EXPECTED INFLATION on the quantity supplied of bonds when it DECREASES?
The quantity supplied of bonds** DECREASES**.
What is the effect of the variable GOVERNMENT DEFICIT on the quantity supplied of bonds when it INCREASES?
The quantity supplied of bonds** INCREASES**.
What is the effect of the variable GOVERNMENT DEFICIT on the quantity supplied of bonds when it DECREASES?
The quantity supplied of bonds** DECREASES**.
What is the effect of the variable INCOME on the demand for MONEY and INTEREST RATE when it INCREASES?
The demand for money INCREASES and the interest rate ** INCREASES**.
What is the effect of the variable INCOME on the demand for MONEY and INTEREST RATE when it DECREASES?
The demand for money DECREASES and the interest rate ** DECREASES**.
What is the effect of the variable PRICE LEVEL on the demand for MONEY and INTEREST RATE when it INCREASES?
The demand for money INCREASES and the interest rate ** INCREASES**.
What is the effect of the variable PRICE LEVEL on the demand for MONEY and INTEREST RATE when it DECREASES?
The demand for money DECREASES and the interest rate ** DECREASES**.
What is the effect of the variable MONEY SUPPLY on the supply for MONEY and INTEREST RATE when it INCREASES?
The supply for money INCREASES and the interest rate ** DECREASES**.
What is the effect of the variable MONEY SUPPLY on the supply for MONEY and INTEREST RATE when it DECREASES?
The supply for money DECREASES and the interest rate ** INCREASES**.
The price-level effect predicts what?
Price level effect predicts an increase in the money
supply leads to a rise in interest rates in response to
the rise in the price level.
The expected-inflation effect shows what?
Expected inflation effect shows an increase in interest
rates because an increase in the money supply may
lead people to expect a higher price level in the future
The liquidity effect shows what?
The liquidity effect based on the liquidity preference framework leads to the conclusion that an increase in the money supply will lower interest rates.
The income effect finds what?
The income effect finds interest rates rising because increasing the money supply has an expansionary influence on the economy.
When does market equilibrium occur?
A market equilibrium occurs when the amount that people are willing to buy (demand) equals the amount that people are willing to sell (supply) at a given price. Bd = Bs
What does Bd > Bs mean in reference to the bond market?
There is excess demand in the bond market and therefore, price will rise and interest rate will fall.
What does Bd < Bs mean in reference to the bond market?
There is excess supply in the bond market and therefore, price will fall and interest rate will rise.
What does Bd = Bs mean in reference to the bond market?
Defines market equilibrium
What is the relationship of interest rates and quatity demand in the Bond Market?
Interest rate and quantity demanded are positively related (higher interest rates increases the quantity demanded of bonds)
What is the relationship of interest rates and quatity supplied in the Bond Market?
Interest rate and quantity demanded are negatively related (higher interest rates decreases the quantity of supplied bonds)
