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© 2014 Pearson Canada Inc.#
In the figure above, a factor that could cause the demand for bonds to decrease (shift to the
left) is ____.
A) an increase in the expected return on bonds relative to other assets
B) a decrease in the expected return on bonds relative to other assets
C) an increase in wealth
D) a reduction in the riskiness of bonds relative to other assets
Answer: B
Diff: 2 Type: MC Page Ref: 91
Skill: Applied
Objective List: 5.3 Outline the factors that cause interest rates to change
Everything else held constant, an increase in expected inflation, lowers the expected return on
____ compared to ____ assets.
A) bonds; financial
B) bonds; real
C) physical; financial
D) physical; real
Answer: B
Diff: 1 Type: MC Page Ref: 93
Skill: Applied
Objective List: 5.3 Outline the factors that cause interest rates to change
Everything else held constant, an increase in the riskiness of bonds relative to alternative
assets causes the demand for bonds to ____ and the demand curve to shift to the ____.
A) rise; right
B) rise; left
C) fall; right
D) fall; left
Answer: D
Diff: 1 Type: MC Page Ref: 93
Skill: Applied
Objective List: 5.3 Outline the factors that cause interest rates to change