1. What will happen to the demand for Rembrandt paintings if the stock market undergoes a boom? Why?
2. "The more risk-averse people are, the more likely they are to diversify." Is this statement true, false, or uncertain? Explain your answer.
3. What effect will a sudden increase in the volatility of gold prices have on interest rates?
4. How might a sudden increase in people's expectations of future real estate prices affect interest rates?
5. Explain what effect a large federal deficit should have on interest rates.
6. The president of the United States announces in a press conference that he will fight the higher inflation rate with a new anti-inflation program. Predict what will happen to interest rates if the public believes him.
7. Predict what will happen to interest rates if the public suddenly expects a large increase in stock prices.
8. Would fiscal policymakers ever have reason to worry about potentially inflationary conditions? Why or why not?