When the inflation rate is expected to increase, the _______ for bonds falls, while the _______ curve shifts to the right, everything else held constant. demand; demand demand; supply supply; demand; supply; supply Everything else held constant, if the federal government were to guarantee today that it will pay creditors if a corporation goes bankrupt in the future, the interest rate on corporate bonds will ______ and the interest rate on Treasury securities will ________. increase; increase increase; decrease decrease, increase decrease; decrease If a forecast made using all available information is NOT perfectly accurate, then it is still a rational expectation not a rational expectation. an adaptive expectation. a second-best expectation. Every financial market has the following characteristic It determines the level of interest rates. It allows the common stock to be traded. It allows loans to be made. It channels funds from lenders-savers to borrowers-spenders. Economies of scale enable financial institutions to reduce transactions costs. avoid the asymmetric information problem. avoid adverse selection problems. reduce moral hazard. Banks are important to the study of money and the economy because they channel funds from investors to savers. have been a source of rapid financial innovation are the only important financial institution in the U.S. economy create inflation