12 May THEN THE RESULT OF THESE TWO CHANGES WILL WHAT EFFECT ON THE EQUILIBRIUM PRICE?
Question 1Consider a very simple economy where the only
money or assets at all, is $240 in cash and $350 in travelers checks.
Then in this economy, the amount of M1 is $ ____ and the amount of M2 is
$ ____ .240; 350240; 590590; 0590; 590Question 2A decrease in the liquidity of bonds will
result in a ____ in the demand for bonds, the demand curve will shift to the
____ , and the equilibrium price will ____ .increase; right; falldecrease; left; riseincrease; right; risedecrease; left; fallQuestion 3If firms in the economy find that there are
less profitable business opportunities, then in the bond market, the
equilibrium price will ____ and the equilibrium interest rate will ____ .rise; fallrise; risefall; risefall; fallQuestion 4Suppose that in the bond market, there is a
decrease in wealth levels amoung investors and a decrease in the
government’s budget. Then the result of these two changes will what
effect on the equilibrium price?push the price uppush the price downit’s impossible to tell which
direction the price will gonone of the aboveQuestion 5In the market for bonds, say that liquidy
levels decrease and expected inflation increases. Then in this market,
the equilibrium interest rate for bondswill increasewill decreasecould go up or down, it’s
impossible to tellnone of the above
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