Because of an Expected Rise in Interest Rates in the Future,a

question 75

Multiple Choice

Because of an expected rise in interest rates in the future,a banker will likely

• A)make long-term rather than short-term loans.
• B)buy short-term rather than long-term bonds.
• C)buy long-term rather than short-term bonds.
• D)make either short or long-term loans;expectations of future interest rates are irrelevant.

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Definitions:

45-Degree Line

In economics, a line on a graph that shows where the value of the goods and services produced in an economy equals the total income earned in that same economy.

Disposable Income

Income that is available for saving and spending after income taxes have been deducted.

Consumption

The act of using up goods and services by households or individuals, leading to a decrease in their quantity.

Marginal Propensity

The ratio of a change in consumption (or saving) to a change in income, indicating how much of an income change individuals will spend or save.