How does the liquidity premium theory explain an upward sloping yield curve during normal economic times?
What will be an ideal response?
During normal economic times, future short-term interest rates are not expected to differ much from current short-term interest rates. In this case, long-term interest rates will be higher than short-term interest rates due to a term premium since long-term interest rates reflect the average of current and expected short-term interest rates plus a term premium.
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What is "crowding out"? Why is it important in discussions of fiscal policy? Use an appropriate diagram to illustrate your answer
Which is characteristic of a traditional economy?
a. Communities tend to be fast-growing. b. They are usually based on light industrial production. c. They have a high standard of living. d. Children tend to have the same jobs as their parents did.
The adoption of the QWERTY keyboard in the early days of mechanical typewriters, with its continued use today, has been suggested as a metaphor for:
A. X-inefficiency. B. reverse engineering. C. a lazy monopoly. D. technological lock-in.
The minimum amount of reserves a bank is required to hold is
A. Legal reserves. B. Total reserves. C. Required reserves. D. Excess reserves.