If the expectations theory of the term structure is correct, would a reduction in the supply of thirty-year Treasury bonds affect their yields?
What will be an ideal response?
No. According to the expectations theory, Treasury bonds of different maturities are perfect substitutes. If expectations of the future path of short-term rates remain unchanged, then a reduction in the supply of thirty-year bonds will not affect their yields.
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Refer to Figure 13-2. The marginal revenue from selling the additional unit Qb instead of Qa equals
A) the area (H - E). B) the area (G + H). C) the area G. D) the area (E + F) - (G + H).
Money neutrality is violated in which model?
a. new Keynesian model. b. monetarist model. c. real business cycle model. d. classical model. e. both c and d.
If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $10
a. True b. False Indicate whether the statement is true or false
In 2010, in order to stimulate capital investment, President Obama proposed
A. a reduction in real interest rates. B. an increase in the money supply. C. increased write-offs for businesses purchasing equipment. D. an increase in the tax on capital gains.