People's best guesses about returns on assets are called
(a) expected returns.
(b) liquidity.
(c) risk.
(d) the term structure of returns.
Answer: A
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FIN Chapter 7
- The most likely explanation for the high inflation rates that countries like Russia and the Ukraine have suffered is that
- When a government prints money to finance its expenditures, it is likely to cause
- Large differences in inflation rates among countries are almost always the result of large differences in
- If the nominal money supply grows by 5%, real income falls by 2%, and the income elasticity of money demand is 0.8, then the inflation rate is
- If the income elasticity of money demand is 3/4 and income increases by 8%, by about how much does the price level change?
- If real money demand increases 5% and real money supply increases by 10%, by about how much does the price level change?
- If nominal money supply grows by 3% and real money demand grows by 8%, the inflation rate is
- If real money demand doubles while the nominal money supply is unchanged, what happens to the rice level?
- If the nominal money supply doubles while real money demand is unchanged, what happens to the price level?
- Suppose real money demand is L =0.8 Y- 100,000 (r + pe). If the nominal money supply is 12,000, real output is 15,000, the real interest rate is .02, and the expected inflation rate is .01, then the price level is
- Suppose the real money demand function is Md/P =2400 +0.2 Y- 10,000 (r + pe). Assume M =5000, P =2.0, and pe=.03. If Ywere to increase from 4000 to 5000, then the real interest rate would increase by how many percentage points?
- Suppose the real money demand function is Md/P =2400 +0.2 Y- 10,000 (r + pe). Assume M =5000, pe=0.03, and Y =5000. If the price level were to decrease from 2.5 to 2.0, then the real interest rate would decreaseby how many percentage points (assuming Md, pe, and Yare unchanged)?
- Suppose the real money demand function is Md/P =2400 +0.2 Y- 10,000 (r + pe). Assume M =4000, P =2.0, pe=0.03, and Y =5000. The real interest rate that clears the asset market is
- If the quantity of money demanded exceeds the quantity of money supplied, then
- Under a situation of asset market equilibrium,
- Suppose velocity is constant at4, real output is 10, and the price level is 2. From this initial situation, the government increases the nominal money supply to 6. If velocity and output remain unchanged, by how much will the price level increase?
- Given that P =200, Y =2000, and i =.10, velocity is equal to
- Given that P =200, Y =2000, and i =.10, velocity is equal to
- If real GDP is $4 billion, the price level is 1.25, and the nominal money stock is $500 million, then velocity is
- Velocity is defined as
- Which of the following is the most likely explanation for the causes of the "case of the missing money"?
- If the income elasticity of money demand is 3/4 and the interest elasticity of money demand is -1/4, by what percent does money demand rise if income rises 10% and the nominal interest rate rises from 4% to 5%?
- If the interest elasticity of money demand is -0.1, by what percent does money demand change if the nominal interest rate rises from 2% to 3%?
- If real income rises 4%, prices rise 1%, and nominal money demand rises 4%, what is the income elasticity of real money demand?
- Suppose a new law imposes a tax on all trades of bonds and stock. What is the likely effect on money demand?
If the answers is incorrect or not given, you can answer the above question in the comment box. If the answers is incorrect or not given, you can answer the above question in the comment box.