1. During a period of economic expansion, the supply of bonds __________ and the supply curve shifts to the _________.

a) increases; left b) increases; right c) decreases; left d) decreases; right

2. Higher government deficits ________ the supply of bonds and shift the supply curve to the ______, tending to _______ interest rates.

a) increase, right, raise b) decrease, left, lower c) increase, right, lower d) decrease, left, lower e) none of these-it does not affect the bond supply curve

3. Given a $100,000, 20 year, 7.5% (coupon rate) Treasury bond. On the day of the purchase of that bond (at a price of $100,000), market interest rates rise to 9%. The value of the bond would change by (nearest): [Assume once a year interest payments]

a) $ 7,500 b) $ 13,500 c) $ 17,800 d) $ 21,500