During the 1974-1975 Recession, the Rate on Commercial Paper Increased

question 59

Multiple Choice

During the 1974-1975 recession, the rate on commercial paper increased relative to the rate on T-Bills. This was an indication of the fact that

• A)investors had become nervous about the ability of the federal government to meet its financial obligations.
• B)the inflation rate had increased significantly.
• C)investors had become concerned about default risk in the short-term market.
• D)interest on commercial paper had lost its exemption from the federal income tax.

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