If investors are more optimistic about stocks than they are about bonds, which of the following results is likely to occur? Investors will prefer bonds to stocks because bonds have lower risk. Investors will move to the left along an existing bond demand curve, thus raising bond prices and lowering interest rates. The bond demand curve will shift right, and the loanable funds curve will shift left. The bond demand curve will shift to the left, lowering bond prices, resulting in a shift to the left in the loanable funds market and higher interest rates. a rise in the price of both stocks and bonds a reduction in the real future value of physical assets,increasing the demand for bonds a rise in the nominal future value of physical assets,resulting in higher capital gains for such assets and reducing the demand for bonds 7. In an open economy, if the domestic interest rate is below the world interest rate, then That economy will become a net borrower abroad. That economy will become a net lender abroad. The real world interest rate is likely to fall. 8. How does the government budget deficit affect the bond market? The government budget deficit will have no effect on the bond demand and supply curves. The increased supply of bonds will increase the price of bonds and lower the interest rates on government bonds. The bond supply curve will shift to the right, but households will likely keep savings constant, so bond prices fall and interest rates rise. 10. If the bond market is initially in equilibrium, and bond prices temporarily drop below equilibrium, the result will be an excess demand for bonds and an excess demand for loanable funds an excess demand for bonds and an excess supply of loanable funds an excess supply of bonds and an excess supply of loanable funds an excess supply of bonds and an excess demand for loanable funds