Question Details

A slowing economy leads to lower interest rates because 



1. "Helping to spark yesterday's bond rally was a major _____ in oil prices." The blank is best filled with 
a) rise, because it means interest rates will rise 
b) rise, because it means interest rates will fall 
c) fall, because it means interest rates will rise 
d) fall, because it means interest rates will fall 
2. "So it will be impossible for monetary authorities to get long-term interest rates down unless they can convince lenders they can hold down the ______ rate." Fill in the blank. 
a) tax b) savings c) inflation d) unemployment 
3. "Bond prices sank on news that the unemployment rate fell to its lowest point in January in a year, to 7.1 percent, but then strengthened after the numbers proved too good to be true. On closer examination, most of the decline was caused by reductions in the labor force." Why would the fact that the decline was due to labor force reductions push bond prices back up? 76 
a) inflation fears were alleviated b) actual unemployment had been overestimated 
c) employment rose by more than had been thought 
d) the economy is closer to full capacity than had been thought 
4. "The drop in sales provided a boost to the credit market where many analysts believe a slowing economy would relieve upward pressure on interest rates." A slowing economy leads to lower interest rates because 
a) lower income means a lower demand for money 
b) the Fed may lower rates to stimulate the economy 
c) inflationary pressures are lower, dropping inflation expectations d) all of the above 
5. "Comments by Alan Greenspan, chairman of the Federal Reserve Board, have intensified speculation that inflation will remain subdued and prompted some investment managers to predict even further ______ in interest rates. Prices of some actively traded 30-year Treasury bonds wound up the day with ________ of about three-quarters of a point, or about $7.50 per $1,000 face amount." The blanks are best filled with 
a) rises; an increase b) rises; a decrease c) falls; an increase d) falls; a decrease


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