chương 5

1 Pieces of property that serve as a store of value are called

• 1. A) assets.

• 2. B) units of account

• 3. C) liabilities

• 4. D) borrowings

2 Of the four factors that influence asset demand, which factor will cause the demand for all assets to increase when it increases, everything else held constant?

• 1. A) wealth

• 2. B) expected returns

• 3. C) risk

• 4. D) liquidity

3 If wealth increases, the demand for stocks ________ and that of long-term bonds ________, everything else held constant.

• 1. A) increases; increases

• 2. B) increases; decreases

• 3. C) decreases; decreases

• 4. D) decreases; increases

4 Everything else held constant, a decrease in wealth

• 1. A) increases the demand for stocks.

• 2. B) increases the demand for bonds.

• 3. C) reduces the demand for silver

• 4. D) increases the demand for gold.

5 An increase in an asset's expected return relative to that of an alternative asset, holding everything else constant, ________ the quantity demanded of the asset.

• 1. A) increases

• 2. B) decreases

• 3. C) has no effect on

• 4. D) erases

6 Everything else held constant, if the expected return on ABC stock rises from 5 to 10 percent and the expected return on CBS stock is unchanged, then the expected return of holding CBS stock ________ relative to ABC stock and the demand for CBS stock ________.

• 1. A) rises; rises

• 2. B) rises; falls

• 3. C) falls; rises

• 4. D) falls; falls

7 Everything else held constant, if the expected return on U.S. Treasury bonds falls from 10 to 5 percent and the expected return on GE stock rises from 7 to 8 percent, then the expected return of holding GE stock ________ 8. 9. 10. 11. 12. 13. relative to U.S. Treasury bonds and the demand for GE stock ________.

• 1. A) rises; rises

• 2. B) rises; falls

• 3. C) falls; rises

• 4. D) falls; falls

8 If housing prices are expected to increase, then, other things equal, the demand for houses will ________ and that of Treasury bills will ________.

• 1. A) increase; increase

• 2. B) increase; decrease

• 3. C) decrease; decrease

• 4. D) decrease; increase

9 If stock prices are expected to drop dramatically, then, other things equal, the demand for stocks will ________ and that of Treasury bills will ________.

• 1. A) increase; increase

• 2. B) increase; decrease

• 3. C) decrease; decrease

• 4. D) decrease; increase

10 Everything else held constant, if the expected return on RST stock declines from 12 to 9 percent and the expected return on XYZ stock declines from 8 to 7 percent, then the expected return of holding RST stock ________ relative to XYZ stock and demand for XYZ stock ________.

• 1. A) rises; rises

• 2. B) rises; falls

• 3. C) falls; rises

• 4. D) falls; falls