According to the expectations theory of the term structure, the interest rate on a long-term bond will equal the ________ of the short-term interest rates that people expect to occur over the life of the long-term bond
A) average
B) sum
C) difference
D) multiple
A
You might also like to view...
Suppose a government tax cut increases disposable income. If there is no change in the government deficit or surplus, what effect would this tax cut have on the supply of loanable funds and the demand for loanable funds? What will happen to the real
interest rate?
The view that decision-maker expectations are based on actual outcomes observed during the recent past is called the:
a. rational expectations hypothesis. b. adaptive expectations hypothesis. c. permanent income theory. d. recognition lag.
If your income increases from $40,000 to $48,000 and your consumption increases from $35,000 to $39,000, your marginal propensity to consume (MPC) is:
A. 0.20. B. 0.40. C. 0.50. D. 0.80.
Suppose Country Y produces only corn and clothing using only two inputs-land and labor. Production of corn requires an intensive use of land whereas clothing is a labor-intensive good. If the price of corn increases by 15 percent and the price of clothing remains constant, the Stolper-Samuelson theorem predicts that in the long run
A. the wage rate will increase by more than 15 percent. B. the rental rate of land will increase by 15 percent. C. the rental rate of land will increase by more than 15 percent. D. the wage rate will remain unchanged.