Concerning the typical behavior of interest rates over the course of the business cycle:
A. short-term rates typically fall during economic expansions.
B. long-term rates typically rise during recessions.
C. short-term rates typically exhibit larger fluctuations over the cycle than long-term rates.
D. all of the above.
Concerning the typical behavior of interest rates over the course of the business cycle:
A. short-term rates typically fall during economic expansions.
B. long-term rates typically rise during recessions.
C. short-term rates typically exhibit larger fluctuations over the cycle than long-term rates.
D. all of the above.
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Related questions
6. If there is a shortage of loanable funds, then
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a. |
the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. |
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b. |
the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. |
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c. |
the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. |
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d. |
the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium. |
7. We associate the term debt finance with
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a. |
the bond market and we associate the term equity finance with the stock market. |
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b. |
the stock market and we associate the term equity finance with the bond market. |
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c. |
financial intermediaries and we associate the term equity finance with financial markets. |
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d. |
financial markets and we associate the term equity finance with financial intermediaries. |
8. If the demand for loanable funds shifts to the right, then the equilibrium interest rate
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a. |
and the quantity of loanable funds rises. |
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b. |
and the quantity of loanable funds falls. |
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c. |
rises and the quantity of loanable funds falls. |
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d. |
falls and the quantity of loanable funds rises. |
9. Long-term bonds are
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a. |
riskier than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds. |
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b. |
riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds. |
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c. |
less risky than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds. |
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d. |
less risky than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds. |
10. Compared to bondholders, stockholders
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a. |
face higher risk and have the potential for higher returns. |
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b. |
face higher risk but receive a fixed payment. |
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c. |
face lower risk and have the potential for higher returns. |
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d. |
face lower risk but receive a fixed payment. |
11. The old adage, 'don't put all your eggs in one basket', is very similar to a modern bit of advice concerning financial matters:
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a. |
Buy low-risk bonds. |
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b. |
Use a medium of exchange. |
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c. |
Diversify. |
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d. |
Intermediate. |
12. A budget surplus is created if
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a. |
the government sells more bonds than it buys back. |
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b. |
the government spends more than it receives in tax revenue. |
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c. |
private saving is greater than zero. |
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d. |
None of the above is correct. |
The liquidity premium theory of the term structure
| A | indicates that today's long-term interest rate equals the average of short-term interest rates that people expect to occur over the life of the long-term bond. |
| B. assumes that bonds of different maturities are perfect substitutes. |
| C. suggests that markets for bonds of different maturities are completely separate because people have different preferences. |
| D. does none of the above. |
