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AP Macroeconomics Mea 3 A a Define the Principal Attributes Liquidity Rate of Return and Risk Associated with Various Classes of Financial Assets Questions

Compare money, savings accounts, stocks, and bonds by liquidity and return, then relate interest rates to cash holdings and existing bond prices.

Syllabus
Effective Fall 2022
Course
AP Macroeconomics

Exam points

  • distinguish cash, deposits, stocks, and bonds by liquidity, ownership, lending, and interest features
  • identify currency and demand deposits as more liquid than savings or investment assets
  • explain the forgone interest on alternative assets as the opportunity cost of holding cash
  • explain and apply the inverse relationship between market interest rates and existing bond prices
  • compare present and future monetary values using the return available over time

AP Macroeconomics Mea 3 A a Define the Principal Attributes Liquidity Rate of Return and Risk Associated with Various Classes of Financial Assets Questions question 1

[Maximum number: 1]

Assume the economy of Jenland is in short-run equilibrium at a real output level above full-employment real output.

Based on the change in the interest rate shown on your graph in part B, will each of the following increase, decrease, or remain the same in Jenland in the short run?

The price of previously issued bonds

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