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ECON 345-001 Fall 2023 > CH5: Effect of Variable Change to Quantity Demanded > Flashcards

CH5: Effect of Variable Change to Quantity Demanded Flashcards

1
Q

When the variable wealth increases, the quantity of an asset demanded __________.

A

Increases

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2
Q

When the variable wealth decreases, the quantity of an asset demanded __________.

A

Decreases

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3
Q

When the expected return of stocks are higher than bonds, then the quantity demanded for stocks _______________.

A

Increases

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4
Q

When the expected return of stocks are lower than bonds, then the quantity demanded for stocks _______________.

A

Decreases

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5
Q

When the expected return of real estate is higher than saving accounts, then the quantity demanded for real estate _______________.

A

Increases

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6
Q

When the expected return of real estate is lower than saving accounts, then the quantity demanded for real estate _______________.

A

Decreases

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7
Q

When the risk of loss in stocks rises, then the quantity demanded for stocks ___________.

A

Decreases

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8
Q

When the risk of loss in stock falls, then the quantity demanded for stocks _____________.

A

Increases

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9
Q

If the liquidity of cash is greater than real estate, then the quantity demand for cash _________________.

A

Increases

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10
Q

If real estate has more liquidity than carbon fuel credits, then the quantity demand for real estate _____________.

A

Increases

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11
Q

What is the effect of the variable WEALTH on quantity of an asset demanded when it INCREASES?

A

The quantity of an asset demanded** INCREASES**.

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12
Q

What is the effect of the variable WEALTH on quantity of an asset demanded when it DECREASES?

A

The quantity of an asset demanded** DECREASES**.

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13
Q

What is the effect of the variable EXPECTED RETURN RELATIVE to Other Assets on quantity of an asset demanded when it INCREASES?

A

The quantity of an asset demanded** INCREASES**.

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14
Q

What is the effect of the variable EXPECTED RETURN RELATIVE to Other Assets on quantity of an asset demanded when it DECREASES?

A

The quantity of an asset demanded** DECREASES**.

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15
Q

What is the effect of the variable LIQUIDITY RELATIVE to Other Assets on quantity of an asset demanded when it INCREASES?

A

The quantity of an asset demanded** INCREASES**.

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16
Q

What is the effect of the variable LIQUIDITY RELATIVE to Other Assets on quantity of an asset demanded when it DECREASES?

A

The quantity of an asset demanded** DECREASES**.

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17
Q

What is the effect of the variable RISK RELATIVE to Other Assets on quantity of an asset demanded when it DECREASES?

A

The quantity of an asset demanded** INCREASES**.

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18
Q

What is the effect of the variable RISK RELATIVE to Other Assets on quantity of an asset demanded when it INCREASES?

A

The quantity of an asset demanded** DECREASES**.

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19
Q

What is the effect of the variable WEALTH on the quantity demand for bonds when it INCREASES?

A

The quantity demand for bonds** INCREASES**.

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20
Q

What is the effect of the variable WEALTH on the quantity demand for bonds when it DECREASES?

A

The quantity demand for bonds** DECREASES**.

21
Q

What is the effect of the variable EXPECTED INTEREST RATE on the quantity demand for bonds when it DECREASES?

A

The quantity demand for bonds** INCREASES**.

22
Q

What is the effect of the variable EXPECTED INTEREST RATE on the quantity demand for bonds when it INCREASES?

A

The quantity demand for bonds** DECREASES**.

23
Q

What is the effect of the variable EXPECTED INFLATION on the quantity demand for bonds when it INCREASES?

A

The quantity demand for bonds** DECREASES**.

24
Q

What is the effect of the variable RISKINESS of BONDS on the quantity demand for bonds when it DECREASES?

A

The quantity demand for bonds** INCREASES**.

25
Q

What is the effect of the variable RISKINESS of BONDS on the quantity demand for bonds when it INCREASES?

A

The quantity demand for bonds** DECREASES**.

26
Q

What is the effect of the variable LIQUIDITY of BONDS on the quantity demand for bonds when it INCREASES?

A

The quantity demand for bonds** INCREASES**.

27
Q

What is the effect of the variable LIQUIDITY of BONDS on the quantity demand for bonds when it DECREASES?

A

The quantity demand for bonds** DECREASES**.

28
Q

What is the effect of the variable PROFITABILITY of INVESTMENTS on the quantity supplied of bonds when it INCREASES?

A

The quantity supplied for bonds** INCREASES**.

29
Q

What is the effect of the variable PROFITABILITY of INVESTMENTS on the quantity supplied of bonds when it DECREASES?

A

The quantity supplied of bonds** DECREASES**.

30
Q

What is the effect of the variable EXPECTED INFLATION on the quantity supplied of bonds when it INCREASES?

A

The quantity supplied of bonds** INCREASES**.

31
Q

What is the effect of the variable EXPECTED INFLATION on the quantity supplied of bonds when it DECREASES?

A

The quantity supplied of bonds** DECREASES**.

32
Q

What is the effect of the variable GOVERNMENT DEFICIT on the quantity supplied of bonds when it INCREASES?

A

The quantity supplied of bonds** INCREASES**.

33
Q

What is the effect of the variable GOVERNMENT DEFICIT on the quantity supplied of bonds when it DECREASES?

A

The quantity supplied of bonds** DECREASES**.

34
Q

What is the effect of the variable INCOME on the demand for MONEY and INTEREST RATE when it INCREASES?

A

The demand for money INCREASES and the interest rate ** INCREASES**.

35
Q

What is the effect of the variable INCOME on the demand for MONEY and INTEREST RATE when it DECREASES?

A

The demand for money DECREASES and the interest rate ** DECREASES**.

36
Q

What is the effect of the variable PRICE LEVEL on the demand for MONEY and INTEREST RATE when it INCREASES?

A

The demand for money INCREASES and the interest rate ** INCREASES**.

37
Q

What is the effect of the variable PRICE LEVEL on the demand for MONEY and INTEREST RATE when it DECREASES?

A

The demand for money DECREASES and the interest rate ** DECREASES**.

38
Q

What is the effect of the variable MONEY SUPPLY on the supply for MONEY and INTEREST RATE when it INCREASES?

A

The supply for money INCREASES and the interest rate ** DECREASES**.

39
Q

What is the effect of the variable MONEY SUPPLY on the supply for MONEY and INTEREST RATE when it DECREASES?

A

The supply for money DECREASES and the interest rate ** INCREASES**.

40
Q

The price-level effect predicts what?

A

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.

41
Q

The expected-inflation effect shows what?

A

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

42
Q

The liquidity effect shows what?

A

The liquidity effect based on the liquidity preference framework leads to the conclusion that an increase in the money supply will lower interest rates.

43
Q

The income effect finds what?

A

The income effect finds interest rates rising because increasing the money supply has an expansionary influence on the economy.

44
Q

When does market equilibrium occur?

A

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

45
Q

What does Bd > Bs mean in reference to the bond market?

A

There is excess demand in the bond market and therefore, price will rise and interest rate will fall.

46
Q

What does Bd < Bs mean in reference to the bond market?

A

There is excess supply in the bond market and therefore, price will fall and interest rate will rise.

47
Q

What does Bd = Bs mean in reference to the bond market?

A

Defines market equilibrium

48
Q

What is the relationship of interest rates and quatity demand in the Bond Market?

A

Interest rate and quantity demanded are positively related (higher interest rates increases the quantity demanded of bonds)

49
Q

What is the relationship of interest rates and quatity supplied in the Bond Market?

A

Interest rate and quantity demanded are negatively related (higher interest rates decreases the quantity of supplied bonds)

ECON 345-001 Fall 2023 (16 decks)

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