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6. The crowding out effect refers to: A: corporate borrowing exceeding government borrowing B: government borrowing reducing the available funds for borrowing C: heavy long-term

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6. The crowding out effect refers to: A: corporate borrowing exceeding government borrowing B: government borrowing reducing the available funds for borrowing C: heavy long-term borrowing by government D: corporations issuing securities of long maturity 7. If market interest rates move upwards after an investor buys a government bond, the investor may: A: sell the bond back to Treasury B: sell the bond in the secondary markets for a capital loss C: sell the bond in the secondary markets for a capital gain D: hold the bond until market rates return to the original level and have a capital gain. 8. A bank puts in a bid for $500 000 of 182-day Treasury notes at a yield of 5.8% per annum. What price will the bank pay if the tender is successful? A: $448 028.67 B: $485 756.54 C: $485 946.17 D: S486 101.73 9. When a change in monetary policy is implemented, the initial effect on interest rates is, generally, the A: income effect B: liquidity effect C: expected inflation effect D: wealth effect 10. In the loanable funds approach to interest rate determination, the demand curve slopes downward because: A: when interest rates are low, inflation is low B: the lower the interest rates, the greater the demand for funds C: the higher the interest rates, the greater the demand for funds D: the lower the interest rates, the smaller the demand for funds Page 3 of 12

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