1) If wealth increases, the demand for stocks ________ and that of long-term bonds ________, everything else held constant.

A) increases; increases

B) increases; decreases

C) decreases; decreases

D) decreases; increases

2) An increase in an asset's expected return relative to that of an alternative asset, holding everything else constant, ________ the quantity demanded of the asset.

A) increases

B) decreases

C) has no effect on

D) erases

3) An increase in the expected rate of inflation will ________ the expected return on bonds relative to the that on ________ assets, everything else held constant.

A) reduce; financial

B) reduce; real

C) raise; financial

D) raise; real

4) If fluctuations in interest rates become smaller, then, other things equal, the demand for stocks ________ and the demand for long-term bonds ________.

A) increases; increases

B) increases; decreases

C) decreases; decreases

D) decreases; increases

5) The opportunity cost of holding money is

A) the level of income.

B) the price level.

C) the interest rate.

D) the discount rate.