Question

20. In the bond market, the bond demanders are the and the bond suppliers are the A) lenders: borrowers B) lenders, advancers C) borrowers; lenders D) borrowers, advancers 21. The demand curve for bonds has the usual downward slope, indicating that at prices of the bond, everything else equal, the is higher. A) higher; demand B) higher, quantity demanded C) lower; demand D) lower; quantity demanded 22. Everything else held constant, if interest rates are expected to fall in the future, the demand for long-term bonds today and the demand curve shifts to the A) rises, right B) rises; left C) falls, right D) falls; left 23. When the expected inflation rate increases, the real cost of borrowing and bond supply everything else held constant. A) increases, increases B) increases; decreases C) decreases, increases D) decreases; decreases 24. Everything else held constant, when bonds become less widely traded, and as a consequence the market becomes less liquid, the demand curve for bonds shifts to the and the interest rate A) right; rises B) right; falls C) left; falls D) left; rises 25. When the expected inflation rate increases, the demand for bonds the supply of bonds and the interest rate everything else held constant. A) increases, increases, rises B) decreases; decreases; falls C) increases; decreases; falls D) decreases, increases; rises 26. If stock prices are expected to climb next year, everything else held constant, the curve for bonds shifts and the interest rate A) demand; left: rises B) demand; right; rises C) demand; left; falls D) supply, len, TISES

Answer 1

Answer 20)

Correct option is option A) lender; borrowers'

Answer 21)

Correct option is option D) lower;quantity demanded'

Answer 22)

Correct option is option A) rises; right

Answer 23)

Correct option is option C) decreases; increases

Answer 24)

Correct option is option C) decreases; increases

Answer 2

Question 25.

A correct answer is an option (D), Decreases; Increases; Rises.

When the expected inflation rate increases, the demand for bonds decreases, the supply of bonds increases, and the interest rate rises, everything else held constant.

Explain: 

When inflation rises people are more intended to spend money on consumption rather than on investment, therefore demand for bonds decreases, which leads to increases in the supply of bonds as there will be more borrowers but fewer lenders, this again causes to fall in bond prices. Bond prices and interest rates are inversely related to each other. So when Bond prices fall, the interest rate rises.

Question 26.

A correct answer is an option (A), Demand; left, rises

If stock prices expected to climb next year, everything else held constant, the demand curve for bonds shifts to left, the interest rate rises.

Explain:

when stock prices go up, the demand for stock investment has increased substantially which causes lower demand for bonds, as stocks are a more attractive investment. 

Lower demands shift the curve downward which means the left side.

Lower demand decreases the bond prices and interest rate rises since bond prices and interest rates are inversely related.