Suppose there is a decrease in the liquidity of corporate bonds relative to US Treasury bonds. Consequently, the demand curve for U.S. Treasury bonds will shift to the ____ and the demand curve for Corporate bonds will shift to the ____.
| left; right |
| right; right |
| left; left |
| right; left |
Answer
Option 4
The decrease in liquidity of corporate bonds increases the demand
for U S Treasury bonds and which shifts the demand curve to right
for it. And decreases demand corporate bonds which shift the demand
curve to left.
Liquidity is preferred by the investors so a decrease in liquidity
decreases demand and vice verse.
Suppose there is a decrease in the liquidity of corporate bonds relative to US Treasury bonds....
If the default risk of corporate bonds decreases, relative to US Treasury bonds, then the equilibrium yield on corporate bonds will_____ and the equilibrium yield on US Treasury bonds will _____. Group of answer choices rise; rise rise; fall fall; rise fall; fall
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D 3. In a graph of supply and demand for US dollars, with the exchange rate on the vertical axis, suppose that the US interest rate decreases. Then the demand curve will shift to the __and the exchange rate will. left; decrease left; increase right; decrease right; increase
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Answer the following
Suppose it is the late 1970s, and the rate of price inflation is 12 percent. The Fed chairman, Paul Volker, seeks to permanently lower the rate of inflation (say, from 12% to 8%). The short-run and long-run Phillips Curves for the U.S at this time are illustrated in the figure below. Throughout this analysis, assume consumers have adaptive expectations. PCShort-Rum PC short- PCLong-Rom Inflation rate (percent per year) 12% Expected Inflation = 12% 7% Unemployment rate (percent)...
Which of the following statements are TRUE? A) A decrease in default risk on corporate bonds lowers the demand for these bonds, but increases the demand for default-free bonds. B) The expected return on corporate bonds decreases as default risk increases. C) A corporate bond's return becomes less uncertain as default risk increases. D) As their relative riskiness increases, the expected return on corporate bonds increases relative to the expected return on default-free bonds. Answer: B WHY ACD FALSE?