Refer to the Given Market-For-Money Diagrams

question 342

Multiple Choice

Refer to the given market-for-money diagrams. If the Federal Reserve increased the stock of money, the

• A) S curve would shift leftward and the equilibrium interest rate would rise.
• B) S curve would shift rightward and the equilibrium interest rate would fall.
• C) D3 curve would shift leftward and the equilibrium interest rate would fall.
• D) D3 curve would shift leftward and the equilibrium interest rate would rise.

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Definitions:

Face Value

The nominal or dollar value printed on a security or currency, indicating its worth as stated by the issuing authority.

Yield To Maturity

The total return anticipated on a bond if it is held until the date it matures, including all payments of interest and principal.

5-Year Bond

A debt security issued by governments or corporations with a fixed interest rate and maturity period of five years.

Forward Rate

The future interest rate agreed upon in a forward contract, relating to loans, bonds, or deposits to be made at a specified future time.