Topic 5 - Bond Market

What is the relationship between bond prices and interest rates?

• Positively related

• Negatively related

• No relationship

• Constant

Which of the following increases the quantity demanded of an asset?

• Decreased wealth

• Increased expected return

• Higher risk

• Less liquidity

In bond market equilibrium, when there is excess demand, what happens to interest rates?

• Interest rates fall

• Interest rates rise

• Interest rates remain the same

• Interest rates fluctuate randomly

A rightward shift in the demand for bonds occurs due to:

• Growing wealth

• Increased risk

• Decreased liquidity

• Higher expected interest rates

What happens to bond prices when the supply of bonds increases?

• Prices rise

• Prices fall

• Prices stay constant

• Prices become unpredictable

A rise in expected inflation causes the supply curve for bonds to:

• Shift left

• Stay constant

• Shift right

• Decrease slope

What is the 'liquidity preference framework' primarily concerned with?

• Supply and demand for money

• Bond market liquidity

• Interest rates and inflation

• Central bank interventions

In the liquidity preference framework, as interest rates increase:

• The demand for money decreases

• The demand for money increases

• The supply of money decreases

• The supply of money increases

Which of the following is NOT a factor affecting the demand for money?

• Income

• Government spending

• Price level

• Interest rates

What is the relationship between liquidity and bond yields?

• Higher liquidity results in lower yields

• Lower liquidity results in lower yields

• Liquidity and yields are unrelated

• Higher liquidity results in higher yields