Question Details

Which of the following is the Keynesian interpretation of the sequence of events 


1. Suppose the interest rate is 8%, and a bond with an annual coupon of $90 matures in one year's time, paying its face value of $1000. This bond's current price should be 
a) below $1000 b) $1000 c) above $1000 d) not enough information to tell 65 
2. Suppose that 30 days ago a friend bought a new 90-day treasury bill with a face value of $1000, paying $976. Your friend now wants to sell this bond. If the current annual interest rate is 12%, what should be the approximate market price for this T-bill? 
a) $976 b) $980 c) $984 d) $988 
3. The market price of a bond will decrease by the greatest amount if it 
a) matures in 3 years and interest rates fall b) matures in 3 years and interest rates rise 
c) matures in 10 years and interest rates fall d) matures in 10 years and interest rates rise 
4. If the rate of growth of the money supply is seen to increase in a fully-employed economy, the prices of 
a) 10-year and 1-year bonds should both rise 
b) 10-year and 1-year bonds should both fall 
c) 10-year bonds should rise and of 1-year bonds should fall 
d) 10-year bonds should fall and of 1-year bonds should rise 
5. Which of the following is the Keynesian interpretation of the sequence of events following an expansionary monetary policy? 
a) increased i causing decreased I causing increased Y 
b) decreased i causing decreased I causing increased Y 
c) decreased i causing increased I causing increased Y 
d) increased i causing increased I causing increased Y




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