Which of the following statements is correct?Group of answer choicesAn increase in the Reserve Bank’s target cash rate would leave all other interest rates unchanged if the slope of the yield curve is unchanged.The yield curve could change its slope without current monetary policy changing.A change in the prices of long-term bonds independently of views about future monetary policy would change the position of the yield curve, but not its slope even if current monetary policy is unchanged.A restrictive monetary policy now even if it generates expectations of a more expansionary monetary policy in the future would necessarily reduce all interest rates now.

Which of the following statements is correct?Group of answer choicesA steepening of the yield curve could reflect a belief that the central bank will in the future conduct a more contractionary monetary policy than previously thoughtA flattening of the yield curve could reflect long-term government bonds suddenly being seen as a less attractive investmentThe yield curve reflects the effect of arbitrage in financial markets as well as what the current interest rate is in the overnight marketThe first and third alternatives above are both correct statements while the second alternative is an incorrect statement.

Consider the IS/LM model where the LM is horizontal. Which of the following statements are correct?Group of answer choicesAn expansionary monetary policy involves a reduction in the cash rate, shifting down the yield curve, but without a change in the LM.A restrictive monetary policy would involve an increase in the cash rate, shifting up the LM and reducing investment expenditure.Whether expansionary or restrictive, such monetary policies change the position of the LM but not the position of the yield curve.Both the second and third alternatives above are correct statements, but the first alternative is an incorrect statement.

Which of the following statements is FALSE? A) The shape of the yield curve will be strongly influenced by interest rate expectations. B) We can use the term structure to compute the present and future values of a risk-free cash flow over different investment horizons. C) It is important to use a discount rate that matches both the horizon and the risk of the cash flows. D) The yield curve tends to be inverted as the economy comes out of a recession. E) None of the above is false.

Which one of the following statements is NOT true?Group of answer choicesThe yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal payments equal to the price of the bond.A bond's yield to maturity changes daily as interest rates increase or decrease.The realised yield is the yield that the investor earns if the bond is held to maturity, and all the coupon and principal payments are made as promised.The yield to maturity is the yield that the investor earns if the bond is held to maturity, and all the coupon and principal payments are made as promised.The term structure of interest rates shows the relationship between the yield to maturity and time to maturity.

Suppose the Federal Reserve plans to conduct contractionary monetary policy during a period of increasing inflation. Which of the following is a policy that would promote this decision?Multiple choice question.Increase the interest rate paid on reservesDecrease the interest rate paid on reservesIncrease personal income taxesDecrease personal income taxes