Quiz Module 7 ?s Flashcards
The cost of money is not related to the concept of…
the time value of money
depreciation
opportunity cost
time preference
depreciation
When crowding out occurs, investment spending decreases. What causes this phenomenon?
The total money supply is decreased, decreasing interest rates.
The total money supply is increased, decreasing interest rates.
The total money supply is decreased, increasing interest rates.
The total money supply is increased, increasing interest rates.
The total money supply is increased, increasing interest rates.
Government bonds have lower interest rates than do actively traded corporate bonds of the same maturity because the default premium is lower for government bonds. This illustrates which of the major factors influencing market interest rates?
Deferred consumption
Liquidity preference
Risks of investment
Inflationary expectations
Risks of investment
Which yield curve theory is based on the premises that financial instruments of different terms are not substitutable and therefore the supply and demand in the markets for short-term and long-term instruments is determined largely independently?
The segmented market hypothesis
The expectation hypothesis
Time Value of Money Theory
The liquidity premium theory
The segmented market hypothesis
Which answer is not a correct description of a type of yield curve?
When long-term yields fall below short-term yields, the curve is flat.
When long-term yields fall below short-term yields, the curve is inverted.
When long-term yields are higher than short-term yields, the curve is normal.
When all maturities have similar yields, the resulting curve is flat.
When long-term yields fall below short-term yields, the curve is flat.
