Question

True/False 1.Income Effect shows that a higher level of income causes the demand for money at...

True/False

1.Income Effect shows that a higher level of income causes the demand for money at each interest rate to increase and the demand curve to shift to the left

T/F

2.Interest payments on municipal bonds are not exempt from federal income taxes

T/F

3.Bonds with identical risk, liquidity, and tax characteristics may have different interest rates because the time remaining to maturity is different

T/F

Homework Answers

Answer #1

1)The statement is false. A higher level of income causes the demand for money at each interest rate to increase and the demand curve to shift to the right.

2) The statement is false. Interest payments on municipal bonds are exempt from federal income taxes. Exempt status is based on reciprocal immunity.

3) The statement is true. Bonds with identical risk, liquidity, and tax characteristics may have different interest rates because the time remaining to maturity is different.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. A increase in the tax rate causes ______ in the interest rate on tax exempt​...
1. A increase in the tax rate causes ______ in the interest rate on tax exempt​ bonds, such as municipal bonds. A. increase B. Decrease C. No change 2.Suppose your marginal income tax rate is 20​%.If a corporate bond pays 15​%,then the interest rate that an otherwise identical municipal bond have to pay in order for you to be indifferent between holding the corporate bond and the municipal bond is _____ ​%. ​(Round your response to the nearest whole​ number)....
15 Changes in the money supply, national income, and inflationary expectations will affect ____ rates. Select...
15 Changes in the money supply, national income, and inflationary expectations will affect ____ rates. Select one: a. long-term b. short-term c. average d. intermediate 17 ____ represent debt of the issuer. Select one: a. Assets b. Bonds c. Revenues d. Stocks 18 When the Fed increases the money supply, the quantity of loanable funds increases relative to the demand which may result in ____ interest rates. Select one: a. lower b. higher c. no relationship with d. no change...
The interest rate effect on aggregate demand indicates that a(n): A. Decrease in the price level...
The interest rate effect on aggregate demand indicates that a(n): A. Decrease in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending B. Decrease in the price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending C. Increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending D. Increase in the supply of money...
Which of the following statements is true? a)Assuming all else equal, if a household is optimistic...
Which of the following statements is true? a)Assuming all else equal, if a household is optimistic about future income, it is likely to cause a left shift of the current credit demand curve of the household. b)John makes it a point to save a portion of his salary every month. Assuming all else equal, if the real interest rate increases, it is likely to cause John's credit supply curve to shift to the left. c)Everything else remaining unchanged, if households...
The aggregate demand curve shows the relationship between the aggregate price level and: A) aggregate productivity....
The aggregate demand curve shows the relationship between the aggregate price level and: A) aggregate productivity. B) the aggregate unemployment rate. C) the aggregate quantity of output demanded by households, businesses, the government, and the rest of the world. D) the aggregate quantity of output demanded by businesses only. 2.When the aggregate price level increases, the purchasing power of many assets falls, causing a decrease in consumer spending. This is known as the _____ effect and is a reason why...
19. We would expect that the level of income that would equate total demand for and...
19. We would expect that the level of income that would equate total demand for and supply of money would be: (a) roughly at the level of the Fed’s interest rate target; (b) lower the lower the interest rates; (c) equal to the level that would equate realized investment with realized savings; (d) higher the lower the interest rate (or lower the higher the interest rate). 20. For several decades, Japan was in a “liquidity trap.” Consequently: (a) further monetary...
The liquidity effect: 1) refers to the initial short-term effect of a decrease in the money...
The liquidity effect: 1) refers to the initial short-term effect of a decrease in the money supply when interest rates rise 2) refers to the initial short-run effect of an increase in the money supply on interest rates 3) decreases the amount of excess cash individuals hold when interest rates drop 4) has no effect on the demand for bonds In the equation of exchange: 1) M = marginal revenue, V = velocity of trade. P = price level, T...
_________ is a plot of the yields on bonds with different terms to maturity with the...
_________ is a plot of the yields on bonds with different terms to maturity with the same risks. Expectation Forward rate Yield curve Market segmentation __________ bonds have higher default risk than bonds with ratings above Baa (BBB). Expectation Junk Liquidity Spot QUESTION 3 ________ occurs when the bond issuer is unable to make interest payments when promised. Liquidity Intermediation Default Yield 1 points    QUESTION 4 _____ indicates how much additional interest investors must receive to hold a riskier...
1. How exactly can the RBA conduct an expansionary policy, and how can it be represented...
1. How exactly can the RBA conduct an expansionary policy, and how can it be represented in AD-AS model? a. the RBA buys government bonds and Treasury bills, and AD curve shifts right. b. the RBA sells government bonds and Treasure bills, and AS curve shift right. c. the RBA increase the required-reserve ratio, and AD curve shift left. d. the RBA decrease income taxes, and AD curve shift right. 2. If the RBA is very sensitive to changes in...
Please explain why you think your answers are correct. Thank you! 1. Preferred Habitat Theory states...
Please explain why you think your answers are correct. Thank you! 1. Preferred Habitat Theory states that investors and borrowers always concentrate on a particular maturity market and never change it. (True or False) 2. The relationship among interest rates on bonds with identical default risk but different maturities is called the (liquidity structure of interest rates, yield curve, physical money curve, or time-risk structure of interest rates) 3. A firm's state of incorporation affects the yield on the debt...