Microsoft Word - Money, Banking, and Int Finance(scribd).docx

Money, Banking, and International Finance

surplus
shortage
quantity demanded

closed economy

open economy

small open economy

Chapter Questions

1. Which six factors shift the demand for bonds and in which direction?


2. Which four factors shift the supply for bonds and in which direction?


3. Draw a bond market with a supply and demand function. What would happen in the market
   if the 2008 Financial Crisis causes wealth to drop?


4. Draw a bond market with a supply and demand function. What would happen in the market
   if a government imposes higher taxes on businesses?


5. Draw a bond market with a supply and demand function. What would happen in the market
   if investors expect greater returns from their investment?


6. How would the demand and supply functions for a bond market shift during a business cycle
   and during a recession?


7. Calculate the real interest rate if the nominal interest rate equals 90% while the inflation rate
   is 100%. Please calculate the exact and approximation.


8. How would the demand and supply functions shift in the bond market if investors,
   governments, and businessmen expect greater inflation? You will prove the Fisher Equation
   and the impact of expected inflation on the market interest rate and the bond’s price.


9. Distinguish between the loanable funds market and bond market.


10. Draw a loanable funds market with an equilibrium interest rate of 7%. What would happen if
    the world’s interest rate is 9%?


11. Draw a loanable funds market with an equilibrium interest rate of 7%. What would happen if
    the world’s interest rate is 5%?