Chapter 4

Question 1

Asset

Question 2

Asset market approach

Answer 2

emphasizes stocks of assets rather than flows
in determining asset prices

Question 3

Demand curve

Answer 3

shows the
relationship between the quantity demanded and the price when all other economic
variables are held constant

Question 4

Econometric models

Answer 4

models whose equations are estimated with statistical
procedures using past data

Question 5

Excess demand

Question 6

Excess supply

Question 7

Expected return

Question 8

Fisher effect

Answer 8

Theory that says, When
expected inflation rises, interest rates will rise.

Question 9

Liquidity

Answer 9

how much cash on hand one actor holds

Question 10

Market equilibrium

Answer 10

when supply and demand meets

Question 11

Risk

Question 12

Standard deviation

Answer 12

measure of risk

Question 13

Supply curve

Question 14

Theory of portfolio choiche

Answer 14

tells us how much of an asset people want to hold in
their portfolio. It states that, holding all the other factors constant:
1. The quantity demanded of an asset is usually positively related to wealth.
2. The quantity demanded of an asset is positively related to its expected return
relative to alternative assets.
3. The quantity demanded of an asset is negatively related to the risk of its
returns relative to alternative assets.
4. The quantity demanded of an asset is positively related to its liquidity relative
to alternative assets