Which fact about the term structure is the expectations theory unable to explain?
A. Why interest rates on bonds with different terms to maturity tend to move together over time.
B. Why longer-term yields tend to be higher than shorter-term yields.
C. Why yields on short-term bonds are more volatile than yields on long-term bonds.
D. Why long-term bond yields are influenced by expected future short-term bond yields.
Answer: B
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If the Fed believes the natural rate of unemployment is 5.5 percent and the natural rate is really 5 percent, what is likely to happen in the short run?
a. The Fed will allow unemployment to be unnecessarily high and output to be unnecessarily low. b. The Fed will allow unemployment to be unnecessarily high, but output will remain at potential. c. The Fed will allow unemployment to be unnecessarily low and output to be unnecessarily high. d. The Fed will allow output to be unnecessarily low, but unemployment will remain at the natural rate. e. The Fed will allow unemployment to be unnecessarily low and output to be unnecessarily low.
Traci is a nurse, and she gets paid an additional $1.00 per hour for agreeing to work the night shift. Carol is also a nurse, but she works the day shift and does not get paid this extra dollar per hour. This difference in pay is an example of a compensating differential
a. True b. False Indicate whether the statement is true or false
If the nominal interest rate is 8 percent and expected inflation is 2.5 percent, then what is the real interest rate?
a. 10.5 percent b. 20 percent c. 5.5 percent d. 3.2 percent
In recent years the Federal Open Market Committee has focused on a target for
a. M1 growth. b. the federal funds rate. c. the number of Treasury Securities issued by the federal government. d. total reserves of banks.